Lords Sitting of 15 December 1982

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Carlisle.

Airline Operating Permits: Tariffs
Baroness Burton of Coventry: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many of the 18 airline operating permits for scheduled passenger and/or cargo services into the United Kingdom not at present containing a clause requiring adherence to published tariffs, will come up for amendment or renewal within the next six months and whether the clause referred to will then be inserted for scheduled passenger services if renewal is granted.
Lord Lyell: My Lords, only one of the 18 outstanding permits is a temporary operating permit coming up for renewal in the next six months. A clause requiring adherence to published tariffs will be included on renewal.
Baroness Burton of Coventry: My Lords, do I understand from that reply that 17 other permits will not be coming up for renewal and that these 17 permits do not include the clause referred to?
Lord Lyell: My Lords, the other 17 permits are open-ended operating permits. They would not come up for renewal in the normal course of events unless the pattern of operations allowed by them needed, for some reason, to be amended. Nonetheless, it is the intention of the Department of Trade to replace these permits by new ones, including the relevant tariff clause, within the next year.
Baroness Burton of Coventry: My Lords, I thank the Minister for that little more encouraging reply. Does he recall that at our last exchanges on 26th October, at column 392, the House was told that it was primarily a matter for the airlines themselves whether or not this clause was adhered to? Is he aware that since then I have seen representatives of several of the airlines concerned who maintain that this is complete nonsense and that it would be perfectly possible for the Department of Trade to check adherence to these licences? Will the Minister ask the Secretary of State for Trade to have a further look at the matter?
Lord Lyell: My Lords, I am most interested to hear of the meeting which the noble Baroness has had, but I am not altogether surprised. Indeed, that may be the opinion of the representatives of the airlines to whom the noble Baroness spoke, and I shall certainly convey her opinion and thoughts to my noble friend.
Lord Monson: My Lords, would the noble Lord not agree that all attempts artificially to fix prices above the market level are bound to fail in the long run, in that we cannot buck the law of supply and demand except in the very short term? Would he not further agree that air travellers who patronise bucket shops, as all sensible air travellers do, are actually doing the airlines a favour in as much as they are paying money for tickets which the airlines are quite unable to sell at the full published rates?
Lord Lyell: My Lords, the noble Lord indeed makes one or two valid points and, as one who yesterday filled in a cheque for a fantastically low price for your Lordship's sking trip to Zurich, I would agree in some part with what the noble Lord said. However, I would reiterate to the noble Lord, and indeed to your Lordships, that we have to look to the industry to deal with this point and it is an essentially commercial matter. Above all, we support the efforts made in IATA and in the Board of Airline Representatives in the United Kingdom towards the elimination of illegal discounting.
Baroness Burton of Coventry: My Lords, I should like to ask the Minister to clear up one point which I am sorry I forgot to raise earlier. As to the new clause which will be inserted into the permits when they are applied for, will the airlines have to file in their application for a permit a list of the scheduled fares which they themselves then guarantee to keep?
Lord Lyell: My Lords, so far as I am aware, the airlines would not have to file anything in the permit; they would only file details of the alterations in the existing permit, which may or may not have anything to do with fares. But certainly I shall ascertain the details of the exact clause and write to the noble Baroness.

Articulated Vehicles: Jack-Knifing
2.41 p.m.
Lord Davies of Leek: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what research has been done into, and what suggestions have been made by the Ministry of Transport to solve, the problem of deaths and accident due to loads jack-knifing on articulated vehicles; and whether it is true that a device has been invented to prevent jack-knifing, but the Ministry decided that it was too expensive to be made compulsory.
The Earl of Avon: My Lords, the Transport and Road Research Laboratory and the Motor Industry Research Association have conducted several research projects into the problems of braking stability of heavy vehicles and the various remedies. There is no complete solution to the problem, but the principal devices aimed at reducing the onset of jack-knifing are the load sensing valve and the wheel anti-lock device. Construction and Use Regulations now require one or

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other of these devices to be fitted to all new heavy lorries and trailers from 1st October 1982.
Lord Davies of Leek: My Lords, while I thank the Minister for the Answer to that Question, the fact is that articulated lorries—
Noble Lords: Question!
Lord Davies of Leek: My Lords, is it not a fact that articulated lorries and crowbar fixed lorries are increasing? Is it also a fact that, during winter time, with the increase in the tonnage of lorries, jack-knifing is liable to be a greater liability? Will the noble Earl answer the latter part of the Question; namely, did the Ministry of Transport say that research would be too expensive, or that the device would be too expensive to put on to lorries compulsorily to prevent jack-knifing?
The Earl of Avon: My Lords, the noble Lord managed to convey an awful lot of questions in that supplementary. I ought to start by saying, first, that jack-knifing has been decreasing since the 1970s when load sensing standards started. Articulated vehicles have increased in number, but against that the actual number of accidents caused by articulated vehicles has gone down, so that is satisfactory.
The noble Lord also asked about heavy vehicles. My information is that on heavy vehicles the extra axles should actually help rather than hinder jack-knifing. Concerning expense as regards the anti-locking devices, the legislation which we have introduced has offered either the sensory devices or the anti-locking devices, and it is an option for vehicle owners to say which they want. The anti-locking device is slightly more expensive than the other one.
Lord Inglewood: My Lords, would there not be fewer accidents if these vehicles did not travel at such excessive speeds, as many of them do, and then tend to go out of control? Is my noble friend satisfied that there are some police forces in this country where it appears that this law is not enforced?
The Earl of Avon: My Lords, I have no evidence to support what my noble friend has said, but should he have any, I shall be happy to consider it.
Lord Underhill: My Lords, is it not a fact that the two TRRL reports, to which the noble Earl, Lord Avon, has referred, indicate quite clearly that the ratio of fatal accidents involving articulated lorries and rigid lorries is higher in the case of articulated lorries by 1.4:1? Does that not indicate, therefore, the seriousness of the situation? Is it not also the case that these reports deal only with the number of fatal accidents for the year 1976? Are any further reports available, and what are the figures for all the accidents, not just fatal accidents?
The Earl of Avon: My Lords, the figures on which I was working are injury accidents, but, as the noble Lord will be aware, the problem here is to get the correct figures because, again, the police in different
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areas have different interpretations of how to list accidents of this sort, which makes figures of the kind about which the noble Lord is asking very hard to discover.
Recent legislation, on 1st October this year, when we introduced the EEC braking directives for heavy vehicles, is aimed specifically at setting standards of braking stability, which we think will reduce the likelihood of jack-knifing. I believe that in this policy we lead Europe, and I hope it will lead to a successful reduction in accident figures.
Baroness Trumpington: My Lords, did I hear my noble friend correctly when he said that these devices would be fitted to new vehicles? What is the situation with regard to old ones? Is it possible to fit devices to them, and has that been done?
The Earl of Avon: My Lords, as regards legislation, my noble friend is quite correct; we cannot legislate backwards on this question. But I am happy to say that over the last few years a large number of vehicles have been fitted with these devices, resulting in the figures that I gave earlier on the reduction of accidents involving articulated lorries.
The Earl of Cork and Orrery: My Lords, when my noble friend said that more axles would help jack-knifing rather than hinder it, did he not mean exactly the opposite?
The Earl of Avon: My Lords, indeed, I did mean exactly the opposite. I am grateful to my noble friend for clarifying that point.
Lord Davies of Leek: My Lords, without trespassing on the patience of the House much longer, may I ask whether the noble Earl is aware that, according to the latest digest of statistics, some 7,000 people a year are killed and tens of thousands are mutilated or injured for life? Is it not time that we looked into the social economics of road transport vis-à-vis the unity of transport of all kinds?
The Earl of Avon: My Lords, of course, as the noble Lord said, we are all very much concerned about the losses on the roads. However, my honourable friend Mrs. Lynda Chalker announced only last week that she intends to take another look at the whole subject, when a new concensus will be taken.
Earl Howe: My Lords, in the search for a solution over the years, has the noble Earl considered inquiring from the technical and engineering department of the Royal Automobile Club about the possibilities of certain systems which could have been used many years ago? I asked a similar question—and I quickly say this before I am accused of making a speech out of it—of my noble friend Lord Davies of Leek many years ago, during the passage of a Transport Bill, and it has taken four or five years for an answer.
The Earl of Avon: My Lords, I am happy to go back to the advice given by the noble Lord, Lord Davies of Leek, on that occasion. I have no new information to offer the noble Earl.

Customs Classification: New Nomenclature
2.48 p.m.
Lord Mottistone: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware of the difficulties there could be for manufacturing industry, and especially for exporting food manufacturers, with the introduction of the new harmonised system of customs tariff nomenclature.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): My Lords, the new harmonised commodity description and coding system has been developed by the Customs Co-operation Council after several years of intensive work to which many countries and trade organisations have contributed. Introduction of a new international nomenclature suitable for customs tariffs, the production of trade statistics and a wide range of trade and transport purposes will inevitably create some difficulties, but it will ensure greater uniformity in customs classification, and benefit trade facilitation and the analysis of internationl trade statistics. Before any final Community decision to adopt the system is taken, there will be the maximum possible consultation with United Kingdom trade interests.
Lord Mottistone: My Lords, while I thank my noble friend for his very full Answer, would he not agree that the difficulties within the European Community to which he referred might largely be dealt with if the Community abolished what are called the notional recipes for processed foods and used only actual recipes in the calculation of monetary compensation amounts as applied to those processed foods?
Lord Trefgarne: My Lords, what my noble friend describes may well be one of the possible ways forward in this matter. The particular complexities to which my noble friend refers I think principally derive from the need to meet the requirements of the common agricultural policy and the vast range of products that that policy encompasses.
Lord Cledwyn of Penrhos: My Lords, can the noble Lord say whether the Government themselves are satisfied with the new system of classification? Can he also indicate whether, in the Government's view, the other countries concerned are going to subscribe to this new system? Do the Government think that the United States and Japan are proposing to subscribe to this? If they do not, will that affect Her Majesty's Government's decision in the matter?
Lord Trefgarne: My Lords, the noble Lord, if I may say so, puts his finger on the nub of this problem. Clearly the new system will be of little advantage if only a few of the nations of the world adhere to it. Certainly the adherence of the United States and Canada, and indeed of Japan, would in our view be crucial.
Lord Mottistone: My Lords, may I follow up the answer to my supplementary? Would my noble friend give a rather firmer assurance of the Government's intention with relation to the abolition of notional recipes? May I ask my noble friend, would he not agree that it would make a very great difference if our Government were to press the Commission on this point in the direction I have indicated?
Lord Trefgarne: My Lords, I am not in a position to give the noble Lord the assurance for which he asks, but I can tell him that his views and the views of those he repreesents will be fully taken into account.

European Commission of Human Rights: Appeal Costs
2.51 p.m.
Viscount De L'Isle: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why they appealed against the opinion of the European Commission of Human Rights, which was in favour of three dismissed railway workers, given on 11th November 1979, despite the fact that this opinion is in accordance with declared Government policy and Section 2 of the Employment Act 1982; what was the cost to public funds of this unsuccessful appeal; and whether the unpaid costs of approximately £40,000 due from the railwaymen will be reimbursed from public funds.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords. Her Majesty's Government did not appeal against the opinion of the European Commission of Human Rights. It was the Commission itself which referred the case to the European Court of Human Rights under Articles 44 and 48(a) of the European Convention on Human Rights.
It is estimated that the total costs which have been incurred by the Government as a result of this case since 1976, other than the cost of the time of the Government's Law Officers and officials, amount to approximately £17,000. The court awarded a total of some £81,000 to the three railwaymen for material loss and a further £65,000 for the legal costs. These were the maximum legal costs which the court judged to have been necessarily incurred and reasonable in amount. The Government could not justify the expenditure of public funds in paying costs in excess of that which the court ordered. To do so would set a very dangerous precedent.
Viscount De L'Isle: My Lords, while thanking my noble friend for his reply, may I point out to him—
Several noble Lords: No! Question!
Viscount De L'Isle: May I ask my noble friend why the Government did not accept the opinion of the Commission and reach a friendly settlement on that

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basis as part of the machinery of the whole operation of the European Convention? Having failed to offer a friendly settlement, does he not think that at least the extra legal costs inflicted on the applicants by Her Majesty's Government's unnecessary resort to the court should at least be met out of public funds?
Earl Ferrers: My Lords, I must point out to my noble friend that it was the Commission and not the Government which took the case to the court. Once the case was before the court the Government had a duty to make their position clear. My noble friend asks why a friendly settlement was not arrived at. There were attempts to arrive at a friendly settlement, and during those attempts the Government offered to refer the issue of costs to a taxing master, to pay the costs incurred by referring the matter to the taxing master and to abide by the taxing master's decision, but the lawers of the railwaymen did not approve of that position.
Lord Renton: My Lords, why did not the Government submit to judgment after the European Commission had given its opinion, especially bearing in mind that the court has never yet overruled the Commission? Why did the Government muster the forces of the Treasury Solicitor, the Law Officers, the Foreign Office and the Department of Employment to argue against the declared principles of the Conservative Government? Is it right that these three railwaymen should be heavily out of pocket, as indeed they are, after winning their case in support of Government policy?
Earl Ferrers: My Lords, I must make it perfectly plain to my noble friend that the Government have always taken the view that the position in which the railwaymen were put by the 1976 Act was totally obnoxious, and that is why we took the first opportunity to alter the position under the Employment Act 1980. When my noble friend asks why we did not submit to the opinion, I can only remind him that the Commission, having given an opinion, decided to take that to the European Court. Once the case was taken to the European Court the Government had to make their position clear.
There are three points of importance which the Government wished to make clear. First, the Government considered it essential to establish that the Government themselves were not responsible as an employer under the convention simply because British Railways is a nationalised industry. Secondly, the Government thought it important that the Commission should consider whether the closed shop system as such was in breach of the convention. Thirdly, the Government had to make clear that the changes which they were making to the law on the closed shop would prevent injustices of this nature in the future.
Lord McCarthy: My Lords, would the noble Earl not agree, in the light of all that has happened, and particularly in the light of what he has just said about the need to clarify the legal position, that it was very unwise of the Government to withdraw the defence put in before the Commission and in pleadings by the previous Government? That is to say, the defence
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which relates to paragraph 2 of Article 11, which stipulates that it is a defence if it can be shown that the acts complained of were necessary in a democratic society to protect the rights of others. But in fact, as we know, the Government did not put in that defence, and therefore we still do not know what the position is exactly.
Earl Ferrers: My Lords, if there was any unwisdom it was on behalf of the previous Government of noble Lords opposite, which introduced an Act which put people in the United Kingdom in the position of being unable to abide by their human rights. That was the situation we wished to see reversed, and that is what we did.
Lord Boyd-Carpenter: My Lords, can my noble friend confirm why it was that counsel instructed by the Government appeared to have argued that these railwaymen had not been treated in a manner which was contrary to the Convention on Human Rights?
Earl Ferrers: My Lords, it was the duty of the Government and their lawyers to pursue the three very important points which I explained in order to make the position perfectly clear, and that is what they did.
Lord Shinwell: My Lords, although it may not be related to the main Question, will the noble Earl inform me and Members of your Lordships' House who perhaps may not know anything about the matter, which is the enactment? When was there passed in either House of Parliament an enactment, which justified the European Commission of Human Rights in awarding costs?
Earl Ferrers: My Lords, the European Court asked the European Commission to adjudicate and give an opinion upon costs. When the Commission gave an opinion it was then taken to the court to give a judgment, and the court's judgment was in line with the Commission's opinion.
Lord Shinwell: My Lords, if I may follow that up for a moment, does that mean that neither House of Parliament at any time passed an enactment which justified the European Commission in awarding costs?
Earl Ferrers: My Lords, Article 50 of the European Convention makes the United Kingdom liable for costs if it loses a case.
Lord Campbell of Alloway: My Lords, reverting to the Question, is my noble friend the Minister aware of any circumstance in these cases which would justify any departure from the established practice of taxation under which a litigant, although successful, obtains of the order of two-thirds of his costs, which I understand (if I may ask) was so in this case?
Earl Ferrers: My Lords, clearly each case has to be judged on its merits, but my understanding is that in cases in this country it is almost unheard of for a successful litigant to recover 100 per cent. of his costs, and often, but by no means always, the figure turns out to be around two-thirds. I would re-emphasise what the European Court said in its recent judgment on

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costs; namely, that applicants should not encounter undue financial difficulties in bringing complaints under the convention, and that it expected that the lawyers in contracting states would co-operate to this end in the fixing of their fees. That is why my right honourable friend the Secretary of State for Employment has publicly asked the applicants' lawyers to honour the spirit of the court's judgment.
Lord Annan: My Lords, did not the lawyers in fact do precisely the opposite, and increase the costs which the railwaymen had to bear?
Earl Ferrers: My Lords, I think it would be most inappropriate for me to make a comment on what the legal costs were, and how they moved.
Lord Wedderburn of Charlton: My Lords, may I ask the Minister to explain to the House how the Government's ambition to clarify the interpretation of the convention—which I am sure your Lordships would share—is consistent with the express withdrawal by this Administration of a defence which is clearly open to a country and which was put into the pleadings by the previous Government, to which my noble friend referred? How is a desire so to clarify consistent with withdrawing such a defence, leaving the court to say, as it did, a few words on the matter but having to leave it open because there had been a lack of legal argument?
Earl Ferrers: My Lords, I do not think it is helpful to go into all the reasons why lawyers took certain views. I would tell the noble Lord that had the previous Government not enacted a piece of legislation which put members of this country against the European Convention on Human Rights, this case would never have been brought; and had it been dealt with expeditiously, as it should have been, under the Labour Government, it would not have taken the course which it has taken now. But the satisfactory part is that the people concerned had their case vindicated and material costs of £81,000 awarded to them, and they have had a large proportion of their costs paid.

Business
3.2 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Ferrers will, with the leave of the House, repeat a Statement that is to be made in another place on the Agriculture Council, 13th/14th December.
With the leave of the House, I should like, as usual, to say a word about the timing of this afternoon's short debates. Following the accepted principle that the mover should be entitled to approximately 15 minutes and that my noble and learned friend the Lord Chancellor should rise to reply no later than 20 minutes before the scheduled end of each debate, I would suggest that other speakers should endeavour to limit their speeches to a maximum of 10 minutes in the case of the debate in the name of my noble friend Lord Renton.
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While there is slightly more leeway in the case of the debate of the noble and learned Lord, Lord Simon of Glaisdale, I would suggest that 15 minutes should be regarded as an absolute limit. I would also point out that if any noble Lord were to speak longer, he would, in the case of the first debate, and might in the case of the second, do so at the expense of other speakers later in the debate.
Finally, a word about future business. After discussion through the usual channels, it has been agreed that the Committee stage of the National Heritage Bill should be continued not only on Thursday of this week but also on Tuesday of next week, 21st December. The Committee stage of the Mental Health (Amendment) (Scotland) Bill, which was to have been taken next Tuesday, will instead be taken after the Christmas Recess.

British Railways (Liverpool Street Station) Bill
Read a second time, and committed to a Select Committee.

House of Lords Offices
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move that the First Report from the Select Committee be agreed to.
I would draw your Lordships' attention, my Lords, to one item in the report, Item 2, Staff of the House. It is proposed to make changes in the membership of the sub-committee on the Staff of the House, and I welcome in particular the fact that the noble Baroness the Leader of the House will be joining the committee as well as the noble Baroness, Lady Seear. Some of your Lordships may be interested to know that that will result in a female majority on the committee, a unique event, I think, in your Lordships' House.
It is also proposed to appoint the same Staff Inspector as in another place. The object of these changes is to ensure that as soon as possible, our staff are paid on the same basis as comparable staff in another place. I beg to move.
Moved, That the First Report from the Select Committee be agreed to.—(Lord Aberdare.)
The report was as follows:
1. Appointment of Sub-Committees
The following members of the Committee were appointed to the Sub-Committee:

(a) Administration Committee

L. Aberdare

L. Ampthill

L. Darling of Hillsborough

L. Denham

V. Eccles

B. Hylton-Foster

L. Kennet

L. Lucas of Chilworth

L. Ponsonby of Shulbrede

L. Reilly

B. White

L. Wigoder

With the Clerk of the Parliaments and the Gentlemen Usher of the Black Rod.
With the power to co-opt further Lords.

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(b) Library Sub-Committee

L. Ardwick

L. Darling of Hillsborough

B. David

V. Eccles

L. Lovell-Davis

L. Seebohm

L. Wigoder

With the Clerk of the Parliaments.
With power to co-opt further Lords and to appoint their own Chairman.

(c) Refreshment Sub-Committee

L. Ampthill

L. Ardwick

L. Denham

L. Hayter

B. Hylton-Foster

L. Ponsonby of Shulbrede

B. Trumpington

L. Wigoder

With the Clerk of the Parliaments.
With power to co-opt further Lords and to appoint their own Chairman.

(d) Staff of the House Sub-Committee

L. Aberdare

L. Nugent of Guildford

B. White

B. Young (L. Privy Seal)

With the Clerk of the Parliaments and the Gentleman Usher of the Black Rod.
With power to co-opt further Lords.

(e) Finance Sub-Committee

L. Aberdare

L. Ampthill

L. Darling of Hillsborough

L. Denham

V. Eccles

L. Kennet

L. Ponsonby of Shulbrede

L. Wigoder

With the Clerk of the Parliaments.
With power to co-opt further Lords.

(f) Works of Art Sub-Committee

M. Cholmondeley

L. Reilly

L. Strabolgi

B. Trumpington

With the Clerk of the Parliaments.
With power to co-opt further Lords and to appoint their own Chairman.

(g) Sub-Committee on Computers

L. Darling of Hillsborough

V. Eccles

With the Clerk of the Parliaments.
With power to co-opt further Lords and to appoint their own Chairman.
2. Staff of the House
The Committee agreed that membership of the Sub-Committee on the Staff of the House be expanded to include the Leader of the House and a Lord from either the Cross-Benches or the minority parties. They agreed that the Baroness Seear should be co-opted to the Sub-Committee for this Session to complete the membership of the Sub-Committee as appointed above.
The Committee also agreed new terms of reference for the Sub-Committee as follows:
"To concern themselves with all staff in the service of the House, with special reference to their well-being and efficiency and to ensure, on behalf of the Offices Committee, that, so far as is consistent with the requirement of the House, conditions of service in the House are kept broadly in line with those in the House of Commons".
The Committee approved the creation of an additional post of Staff Inspector on a shared basis with the House of Commons and the terms of reference proposed for the Staff Inspector in the House of Lords.
The Committee agreed that the Staff Inspector should advise the Clerk of the Parliaments and Black Rod on the assimilation as soon as possible of the actual gradings of staff now in post in the Lords with those of comparable staff in the Commons.
3. Refreshment Department
A statement of accounts for the financial year 1981–82 was laid before the Committee and approved.
4. Photograph of the House in Session
The Committee considered certain photographs of the House in session for permanent display.
5. Works of Art
The Committee were informed of progress on the work of the carving of a bust of Lord Home of the Hirsel.
6. Parliament Office
The Clerk of the Parliaments informed the Committee of the promotion of Mr. D. F. Slater to Senior Clerk and of the appointments of Miss F. P. Tudor and Miss C. M. Kay as Clerks in the Parliament Office.
The Committee were also informed of the appointment of Mr. G. A. Preston as Assistant Counsel to the Chairman of Committees in the place of Mr. T. G. Talbot, C.B., Q.C., who has retired. The Committee expressed their warm appreciation of Mr. Talbot's long and valuable service to the House.
The Committee were also informed of the impending retirement of Mr. C. K. Stevens. Assistant Clerk of the Journals, after 36 years' service in the House of Lords. The Committee expressed their warm appreciation of Mr. Stevens' long and valuable service to the House.
7. Cleaners
The Committee agreed that the Civil Service Union should be granted representative capacity for the housemaids on the staff of the Gentleman Usher of the Black Rod.
8. Parliamentary Delegations
The Committee agreed revised arrangements for the reimbursement of expenses of Lords' delegates attending non-routine meetings of international assemblies.
9. Foreign Visits
The Committee agreed that provision should be made for the expenses of representatives of the House travelling abroad to attend (a) the conference on delegated legislation to be held in Canada in April 1983 and (b) a meeting in Bonn on matters relating to security in early 1983.
10. Working Group on Data Processing
The Committee agreed that provision be made for the share of the cost of a meeting of the International Working Group on Data Processing to be held at Westminster in 1983–84.
11. Revised Scales of Pay and Allowances
The Committee confirmed the application of the following Memoranda to applicable staff of the House of Lords:

IM 82/4

Revised rates of pay for industrial staff

CM/555

Revised responsibility allowances

CM/559

Revised typing proficiency payments

CM/563

Subsistence and meal allowances

CM/583

Revised rates of pay for non-industrial staff

CM/584

Revised London Weighting

IM 82/12

Revised London Weighting for Refreshment Department staff

12. Official Shorthand Writer
The Committee approved a revision in the scale of fees of the Official Shorthand Writer.
13. Hansard Reporting Staff
The Committee approved a revision in the payments to Editors and Reporters for late-night duties and in the fees payable to temporary reporters and transcribers.
14. Superannuation
The Committee were notified of the following awards:

(i) Revised pension and lump sum to T. G. Talbot. C.B., Q.C., Assistant Counsel to the Chairman of Committees, on final retirement from 1st October 1982.

(ii) Pension and lump sum to C. K. Stevens, Assistant Clerk of the Journals, on retirement from 9th January 1983.

(iii) Pension and lump sum to A. H. Town, Personal Assistant to Lords of Appeal, on retirement from 1st November 1982.

(iv) Pension and lump sum to L. W. Burton, Clerical Officer, on retirement from 1st January 1983.

(v) Revised pension and lump sum to Mrs. A. Bellchambers, Cleaner/Housemaid, on final retirement from 27th July 1982.

(vi) Pension and lump sum to Mrs. J. Williams, Housemaid, on formal retirement from 3rd September 1982.

(vii) Revised pension and lump sum to Mrs. M. Talbot, Housemaid, on final retirement from 22nd May 1982.

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(viii) Supplementary death benefit to personal representative of T. J. Rooney (deceased) former Porter, who died on 27th March 1982.

(ix) Short service payment to K. M. Woods, Executive Officer, who resigned on 30th September 1982.

(x) Short service payment to Mrs. J. E. Risdon, Personal Secretary, who resigned on 2nd July 1982.

(xi) Short service payment to Mrs. M. A. Larthe de Langladurc. Personal Secretary, who resigned on 24th September 1982.

(xii) Short service payment to Miss P. M. Dean, Clerical Officer, who resigned on 22nd October 1982.

(xiii) Short service payment to Mrs. A. McCormack. Barmaid Assistant, who resigned on 12th November 1982.

On Question, Motion agreed to.

Legislation
3.6 p.m.
Lord Renton Lord Renton rose to call attention to the volume of legislation including statutory instruments, to the desirability of repealing statutes which have outlived their purpose or have become unnecessary, and to the need to achieve yet more improvement in the quality of legislation; and to move for Papers.
The noble Lord said: My Lords, the importance of this matter is, I am sure your Lordships will feel, indicated by the long and impressive list of speakers, including no fewer than five noble and learned Lords. It is of significance that my noble and learned friend the Lord Chancellor will reply to the debate. I rejoice in that because he has always shown great understanding of this difficult problem, and I trust your Lordships will give him plenty of time for his reply, which could be of great importance. I am glad that his predecessor, the noble and learned Lord, Lord Elwyn-Jones, will be speaking from the Front Bench for the main Opposition party.
Seven years ago, the noble and learned Lord, Lord Simon of Glaisdale, opened a full day's debate in your Lordships' House on the report of the Committee on the Preparation of Legislation, of which I had the honour to be chairman. Our recommendations were well received on both sides of both Houses and by both branches of the legal profession. We drew attention to the vast volume of legislation. Today, the total number of Acts of Parliament in force is about the same as it was then—nearly 3,500—and that is in spite of new statutes having been introduced and in spite of the repealing Acts we have each Session. But the relentless growth of legislation in the last 18 years, whichever party is in power, continues at a rate of over 2,000 pages a year of Statutes at Large. In 1980, 2,876 pages were added to the statute book; last year, 1981, not so many were added—we do not have the collected statutes printed yet—but it will be well over 2,000 again.
In whatever way the statute book is presented—and it is now presented in three or four different ways—it fills at least 50 fat volumes. Also, about 14,000 statutory instruments are in force today. Much of our legislation is so complex, obscure and indeed incomprehensible that even skilled professional advisers cannot say for certain what it means, and it may be to their advantage sometimes to have to say so.
The fact that our legislation is so massive is surely due not only to the total number of statutes that we
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may introduce each Session, but also to the great length of many of them, which is caused by our unbridled passion for detail, of which more anon. Compared with all other European Parliaments, we are over-zealous to a high degree and we spend far more time on legislation each year than any other European Parliament.
No doubt most statutes are genuinely needed when they are passed. They are needed either to implement Government policy, or because Members of both Houses thought that it was in the public interest to fill gaps in the law or to bring the law up to date in our dynamic modern society. Also, each Session we need consolidation Acts and repealing Acts, and I am glad to say that we get them; we have been getting them in increased measure. However, is it not questionable whether all our existing statutes are really necessary? Besides repealing clearly spent and obsolete laws each year, should we not get rid of statutes, some of which were passed in our lifetime and are taken for granted, which experience has now shown to be unenforceable, ineffective, unworkable, or even socially damaging? After all, under our constitution nearly every Act of Parliament is but an experiment.
As an example of what I mean. I should like to mention that in the last Session my noble friend Lady Trumpington persuaded a majority of your Lordships to repeal some Shops Acts. That is the kind of thing that perhaps we could give more attention to doing. Examples that I might give would cause controversy, I accept, and for that reason I shall not give any examples; I want to avoid controversy. Instead, I should now like to concentrate on my main theme, which is the need to improve further the quality of legislation.
Since our committee reported in May 1975 some of our major recommendations have been implemented, and I am sure that the members of our committee are grateful for that. The pace of consolidation has been increased, for example. The series known as Statutes in Force has been completed. Computers are now officially in use for retrieval of past statutory provisions, and that aids the process of consolidation. It also aids those who have to advise on the law. Textual amendment, rather than non-textual amendment, has become the usual (I can almost say the regular) method; but, alas! there are one or two exceptions—bad ones. More explanatory material is given to us, and we can now obtain notes on clauses from the Vote Office. I understand that it was the noble and learned Lord, Lord Gardiner, who, when he was Lord Chancellor, enabled that first to be done. So far as I, as a mere English lawyer, am able to say, Scottish legislation is now dealt with more in its own right, instead of being moulded into a United Kingdom context and pattern, and that is an advance. But perhaps my noble friend Lord Selkirk will have something to say about that later.
All of those improvements are good. Perhaps one of the best of them, from which your Lordships have benefited, is that we recommended that one of the Scottish Law Officers should be a Member or your Lordships' House, and so we have had the great advantage of having the noble and learned Lord, Lord Mackay of Clashfern, and his predecessors, on our Front Bench.
We recommended that there should be more parliamentary draftsmen recruited and trained, as a high priority. We recommended that, not in order to produce still more legislation but in order to spread the load among them—they are heavily pressed—and to give them more time for preparing Bills. There has been a slight improvement, but perhaps when he replies my noble and learned friend the Lord Chancellor can let us know whether there has been any substantial movement with regard to that matter.
We suggested that there should be a new Interpretation Act on the lines of the Bill of the noble and learned Lord, Lord Scarman, which your Lordships passed in the last Session, in a very truncated form, but which alas! was blocked in another place. It would help greatly, too, if there were implemented our recommendation that the Lord Chancellor's Statute Law Committee should keep the structure and language of statutes under continuous review, and report to Parliament at least once every three years the progress made. That recommendation has not yet been implemented, and I hope that we may hear that the Lord Chancellor has not lost sight of it.
Surely the main cause of our statutes being too lengthy and too complex is our habit of legislating in too much detail. This is done in an attempt to achieve certainty of legal effect, so that people may know where they stand in any situation which might arise, and thus avoid troubling the courts. That is the philosophy underlying the practice. But very often that practice has just the opposite effect, because excessive detail leads to complexity, obscurity and uncertainty—uncertainty which might have been avoided if we had legislated in broad terms, setting out the principles and, if necessary, stating our purpose. As the great Sir Edward Coke said, nearly 400 years ago:
"The lawmakers could not possibly set down all cases in express terms".
But that is just what we have been doing for the past 100 years or more—and increasingly, I think.
I hope I am not presuming if I explain what I mean by a statement of principle and a purpose clause. A statement of principle is an expression of the law in broad and general terms. A purpose clause expresses Parliament's intention underlying the legislation, whether it is in general terms or is very detailed. Our committee acknowledged the need for detail in various circumstances, and although we said that the use of statements of principle should be encouraged we did not insist that they should always be used. We recommended that statements of purpose should be used when they are the most convenient way of clarifying the intended scope and effect of detailed legislation, especially of fiscal legislation, where it is virtually impossible to avoid a good deal of detail, so that the citizen knows exactly what taxes he has to pay. We said that all that unavoidable detail, wherever it comes, would be much better understood if its purpose were clearly stated. I regret to say that our advice has not been followed.
In his autobiography, Sir Harold Kent quotes a former chief parliamentary counsel as saying:
"The intelligibility of a Bill is in inverse proportion to its chance of being right!"
I hope that that is not still a working principle in
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parliamentary counsel's office. But most of the draftsmen seem to be allergic both to statements of principal and to purpose clauses, and they continue to give us masses of detail. However, perhaps they are more sinned against than sinning, for Ministers, and all of us in both Houses, are responsible for our legislation, and we really must not expect the legal result of everything foreseeable to be spelt out in a Bill. It is that which causes the chaos. Perhaps one day the noble and learned Lord, Lord Denning, will give us a prize for plain English in a statute and perhaps a prize for brevity. We do not get many prizes at the moment.
Brevity is possible. After all, Moses, in robust ancient Hebrew, no doubt, said: "Thou shalt not steal"—and everyone knew what he meant. We have the Theft Act 1968 in 36 clauses spread over 20 pages—an Act which, because of its uncertainty has had to be considered by the Court of Appeal on no fewer than 30 or more occasions. Another example is the Employment Act 1980, Section 17, which is very detailed and cannot be understood except by reference to the 1974 Act as amended by the 1976 Act. It deals with secondary action in trade disputes. It has been considered on several occasions by the Court of Appeal and twice even by the Judicial Committee of your Lordships' House, and some strong judicial criticism has been made of it. Recently, Sir John Donaldson, presiding over the Court of Appeal as Master of the Rolls in the case of Merkur Island Shipping Corporation v. Loughton and Ors., said, in reference to Section 17, that if the rule of law was to be upheld people must live in accordance with the rules and know what they are. He made a plea to Parliament, when legislating in circumstances directly affecting the man in the street or on the shop floor, to give as high a priority to clarity and simplicity of expression as to refinements of policy.
My Lords, the moment has come for me to conclude, and I do so by saying this. If our Acts of Parliament cannot be understood even by clever experts it not only brings the law into contempt, it brings Parliament into contempt. It is a disservice to our democracy; it weakens the rights of the individual; it eases the way for wrongdoers and it places honest, humble people at the mercy of the state. In the name of reason and justice, Let's get it straight! I beg to move for "short" Papers.
3.23 p.m.
Lord Elwyn-Jones: My Lords, I hasten to assure the noble Lord, Lord Renton, that not only do my right honourable friends and I not find the Motion objectionable, but, on the contrary, we agree wholeheartedly with if, so that in this debate, at any rate, I doubt whether we shall be in the presence of much political controversy although there may be some intellectual lack of agreement. The noble Lord, Lord Renton, is to be thanked for introducing a subject to which he has frequently and properly drawn our attention ever since the report of the distinguished committee named after him and over which he presided came out. I make no complaint about his persistence. It is right that we should constantly keep the matters he has mentioned under review.
The first matter which he has raised in his Motion is the volume of legislation. It is the case that it has

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increased, is increasing, and I have no doubt most people would complete the famous resolution and say that it ought to be diminished. Everyone seems to want less legislation. My experience in Government was that almost every department wants more. Each Minister sought priority for the invaluable, the indispensable offering that his department was bringing before the country for the common weal and for the common public interest.
The corrida (if that is the right word) in the Legislative Committee at the beginning of each parliamentary Session was tremendous. No mercy was shown. It was rather like the famous contest between two eisteddfod choirs where, at the end, one said to the other, "You beat us hollow on 'Lift up your heads, ye gates of brass'; but we gave you hell on 'Love Divine, all loves excelling'." This fight for a place in the legislative programme was one which was always rather painful (if I may speak for myself) for the Lord Chancellor in trying to find time for law reform. It is for us to congratulate the present noble and learned Lord the Lord Chancellor that he has got away with so much so far. I tried my best, too.
So the problem is really to find place for what it is claimed must go into the legislative programme. As Labour Governments are generally reforming governments they may have a tendency to introduce more Bills to achieve social justice and other reforms than others. As Conservative Governments spend much of their time trying to undo the good work of their predecessors, that too imposes legislative liabilities upon it; and so the ding-dong continues for legislative time.
It is the case that Governments of all political complexions since the war have intervened more and more in the social life of the citizen, in the country's economy and industrial relations. It is the case that more and more benefits have sought to be conferred with, correspondingly increasing obligations that have got to be met—all giving rise to the necessity of clarity and precision in defining both sides of the formula. All this development makes increasing demands upon the rarest of all parliamentary commodities, time. If there were less legislation and more parliamentary time, no doubt the quality of our legislation would be better and, incidentally, we might also have more time to debate and discuss the great unsolved issues of our time, like the threat of nuclear world catastrophe and our industrial decline. Parliament is, after all, the forum of the nation where the great issues of public policy ought to be discussed and decided. Yet we often spend more time on the minutiae of Bills and the paragraphs in their schedules than on issues of great national and international concern.
One thing that I think we cannot fairly be called upon to do is to sit many longer hours. As it is, if I may say so, and particularly in another place, much of the legislation is done there in the small watches of the night, and indeed a good deal of it comes here without really any serious consideration through the effluxion of time in another place. It often comes here also at very short notice, so that our ability to examine the matter is limited by time. I wonder whether something could be done to reduce the time taken to consider legislation on the Floor of the House. Getting non-controversial
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law reform Bills through another place by dispensing with a Second Reading stage on the Floor of the House was a valuable improvement. Indeed, a number of important law reforms might well have fallen by the wayside if that Second Reading procedure did not exist. The Whips would be saying "No go" to most or many law reform measures, I fear.
Sensible time limits on speeches of the kinds accepted in this House in short debates could perhaps be applied more extensively. I remember a recent debate on the vaccine damage question which was introduced by the noble Lord, Lord Campbell of Alloway. The restraint which speakers accepted through the timetable announced by the Chief Whip enabled a large number of Members of the House to take part and to do so economically in terms of time—indeed, so much so that in winding up the debate the noble and learned Lord the Lord Chancellor had ample time to treat us to one of his inimitable tours d'horizon on the subject. I hope that he does not mind my putting it in that way. I think it was how he put it himself, or he used words to that effect. I doubt whether the time discipline imposed on that occasion meant that those who took part felt unable to say in substance all that they really wanted to say.
Lord Harvington: My Lords, I wonder whether the noble and learned Lord would advise the greater use of Standing Committees in this House to save the time of this House, in the manner in which they do in another place?
Lord Elwyn-Jones: My Lords, that introduces a very interesting and important suggestion. It would depart a good deal from the main pattern of procedure in the House; but there is no reason why it should not be looked at. One of the difficulties that 1 sec in a proliferation of committees is that the debate and discussion moves from the Chamber to the remote distant corners of the establishment and the House tends to become as empty as another House has tended to become since the proliferation of committees there. But I may be treading on dangerous ground in saying that. It is certainly a matter that we might consider.
When we come to the field of statutory instruments, to which the noble Lord's Motion refers, there we are in this difficulty: statutory instruments cannot be amended; they can only be approved or negatived. There some of the most remarkable confusion and difficulty of interpretation in the law arises. In the case of Davey v. Leeds Corporation, Lord Justice Harman said this:
"To reach a conclusion on this matter involved the court in wading through a monstrous legislative morass, staggering from stone to stone and ignoring the marsh gas exhaling from the forest of schedules lining the way on each side. I regarded it at one time, I must confess, as a slough of despond through which the court would never drag its feet but I have, by leaping from tussock to tussock as best I might, eventually, pale and exhausted, reached the other side where I find myself, I am glad to say. at the same point as that arrived at with more agility by Lord Denning, the Master of the Rolls".
There is indeed a painful field about which no doubt a good deal more can be done. Unfortunately, the complexity of our legislation makes statutory instruments introduced on the strength, the authority, of the Secretary of State inescapable. Already the size of the

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statute book, as the noble Lord said, is vast. If each of those statutory instruments had to be embodied in the Bills themselves, the burden would be absolutely intolerable. So I am afraid that we have to put up with statutory instruments, like them or not. Whether we could do more and give more assistance about making them more comprehensible, is another matter. Then there is another point which I ought to mention in considering the weight of responsibility that falls upon us both governmentally and in Parliament. On top of our own domestic legislation, we have the imposed legislation of the European Economic Community to add to the pressures on parliamentary time.
The second issue raised by the noble Lord, Lord Renton, in his Motion is the desirability of repealing statutes which have outlived their purpose or become unnecessary. Here we have made progress—and very great progress—and I think it is right to proclaim it. This is principally due to the great benefits that we have had from the work of the Law Commissions which were set up by the Labour Administration (if I make a party political point) and with the driving force of my noble and learned friend Lord Gardiner when he was Lord Chancellor. The Law Commissions Act 1965 imposed on the Law Commission and the Scottish Law Commission the statutory duty to prepare draft Bills for giving effect to their programmes of statute law revision and consolidation. Under the leadership of a distinguished line of chairmen, beginning with the noble and learned Lord, Lord Scarman, whose name I see is on the list of speakers but who no doubt is presently detained elsewhere——
Lord Renton: My Lords, he is attending the Privy Council.
Lord Elwyn-Jones: I am much obliged. My Lords, I knew that he would be on good public business of some kind. The noble and learned Lord will give us the benefit of his opinions on this matter. The result of the work of the Law Commissions has been a fruitful harvest of repeals, and a good deal of the dross in the statute book has been removed, although admittedly a good deal is still left. It was my pleasure when I was Lord Chancellor to introduce some of the Bills giving effect to statute law repeals. They were rich in legal and social history, like the legislation which enabled a frightened Government to exile the Tolpuddle martyrs, or the nasty little Act by which King Henry VIII sought to do injury to the estate of Sir Thomas More. All remained on the statute book through the generations. They have now gone, but there is still much more to be done.
But the output of the Law Commissions has not merely repealed the obsolete in our statute book in a very wide range of legislation. By applying in this field the test whether the continuance in force of a Bill served a useful purpose, much more has been achieved than that. The work of the Law Commissions has been supplemented by the hard and expert work of the Joint Committee on Consolidation Bills, to whose members we owe a very great deal. Governmental Bills themselves often take on board the elimination of redundant law. So we have not stood still.
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As to the quality of legislation, it is good at any rate that the noble Lord, Lord Renton, has not blamed the draftsmen for this. I often wish that we could hear their side of the story: how adequate may be the instructions they have received from Ministers as to what goes into the Bills; how much time they are given to prepare them. If your Lordships will give me a moment more time than I ought to be taking after my initial words, the difficulties of the draftsmen were admirably expressed by Mr. Justice Stephen, who had much experience of drafting Bills, when he said:
"Precision is essential to everyone who has ever had. as I have had on many occasions, to draft Acts of Parliament which, although they may be easy to understand, people continually try to misunderstand and in which, therefore, it is not enough to attain to a degree of precision which a person in good faith can understand: but it is necessary to attain if possible to a degree of precision which a person reading in bad faith cannot misunderstand. It is all the better if he cannot pretend to misunderstand it".
That is really a measure of the responsibility which falls upon the parliamentary draftsman and which he tries to carry out. Here again we come back to the clash between quantity and quality, and I certainly await with great interest the views expressed by those who have less to do with the actual process of producing legislation and more to do with interpreting it.
3.41 p.m.
Lord Hooson: My Lords, from these Benches, I should like to congratulate the noble Lord, Lord Renton, on initiating this debate. It is appropriate that he should do so bearing in mind his distinguished record in this field and his chairmanship of the committee which reported in 1975. This debate enables me, as the appointed spokesman for my party on the law and also on behalf of the Alliance, to say certain things today. I am not going to try to spell out the difficulties in this sphere. One can read innumerable articles and innumerable debates in your Lordships' House and in another place which state the difficulties. What I want to state is our approach to the problem and the remedies which we would seek to solve the problems outlined in the noble Lord's speech.
First, as to our approach, it seems to us that in a complex but changing society it is ridiculous that law reform, which is long overdue and which would command the general support of the people of this country and of the vast majority of Members of both Houses of Parliament—law reform which has been carefully inquired into in depth by the Law Commission—should be held up for years because of our failure in this House and in the other place to overhaul our own machinery.
With the greatest respect, I do not agree with the noble and learned Lord, Lord Elwyn-Jones—though I very often do agree with him on other things—that it is absence of time which is responsible for the great hold-up in legislation. It is the misuse of time rather than the absence of time, because very often the great and momentous matters which he outlined, for example, the threat of nuclear war, are inadequately debated in this House and in the other place. Why?—because we clutter up our proceedings by dealing with the minutiae of legal reform, and so on. Therefore I put forward the view that it is the mechanics of the matter that really hold up what the vast

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majority of us agree would be very desirable reforms.
I have been authorised to say, on behalf of the Alliance as a whole, that if there was an Alliance Government in this country one of our top priorities would be an overhaul of the machinery of Parliament in a democratically acceptable way, so as to smooth the path of law reform and to enable the Law Commission to be used more effectively than hitherto so that it can discharge all its duties as set out in the Law Commission Act 1965. I think that the setting up of the Law Commission was a tremendous landmark in the development of law reform in this country. I shall quote the duty of the Law Commissions, as set out in that Act:
"It shall be the duty of each of the Commissions to take and keep under review all the law with which they are respectively concerned with a view to its systematic development and reform, including in particular the codification of such law. the elimination of anomalies, the repeal of obsolete and unnecessary enactments, the reduction of the number of separate enactments and generally the simplification and modernisation of the law."
If I may refer to that part of the noble Lord's Motion today to which I particularly wish to address myself—that part which reads:
"and to the need to achieve yet more improvement in the quality of legislation"—
that is surely what the general words of the duty of the Law Commission referred to.
I yield to no one in my admiration for the enormous achievements of the noble and learned Lord, Lord Denning, in the field of judicial reform, but I do not think that his particular means of achieving reform and of keeping the law abreast of the times through the medium of the courts is sufficient in our day. It is very necessary, and under our proposals I think there would be greater scope for judicial interpretation than there is at the present time; but it was very necessary to have the Law Commissions. Over the 17 years of their existence, both here and in Scotland, I think they have gone a long way to achieve those objectives which the noble and learned Lord, Lord Wilberforce, suggested in the debates should be their objectives, namely, to act as a fresh stimulus to law reform and to enter into a new dimension of law reform rather than to expand the existing methods. I think it is right to acknowledge, as I see the noble and learned Lord, Lord Gardiner, sitting in his place, that it was an enormous achievement for any Lord Chancellor to get that particular Act on to the statute book.
Of course, I have to resist the temptation in this debate to deal with my own views on the further development and expension of the Law Commission. I would simply indicate that I think other law reform agencies such as the Law Reform Committee and the Criminal Law Revision Committee should be brought under its umbrella and that it should have a particular relationship with Royal Commissions and should be available for advice, and so on, to Royal Commissions. But rather, I want to confine myself to the issue of how to ensure that Parliament can reform its own procedures so as to enable the country to benefit more effectively from the Law Commission's work, because every citizen of this country has a vested interest in the simplification and modernisation of the law. If I may say so with great respect, both in this House and in the
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other place, it is very easy to make fun of the way in which we enact our present legislation, and drafting counsel are usually the butt of many of these remarks. We really should look at our own system, our own machinery, and consider how we are going to reform it.
We shall be publishing our agreed views early in the New Year on how the Alliance would propose to change the machinery, but I want to give an indication of my own line of thought in this matter, and in particular as regards the question of the quality of our legislation—simplifying it, reforming it and getting rid of obsolete legislation. I am quite sure that the implementation of law reform—the Law Commission's recommendations and other proposals—really depends on a haphazard selection. I do not think there is any systematic method of selecting the priorities for a legislative proposal. It seems to me there are three particular ways in which, for example, a recommended Bill by the Law Commission, accompanied by its report, might have a chance of becoming law.
The first is if the Lord Chancellor of the day takes a personal interest in a particular reform. Then, it is fairly certain to make some progress if he can twist the arms of his fellows in the Cabinet and get time for it. Secondly, if there is, at the beginning or end of a Parliament and sometimes at the end of a parliamentary Session, some "slack water", then the departments can push forward their favourite Bills and the Lord Chancellor's Department can also push forward a Bill. For example, when a new Government has been elected and before it transforms its manifesto (or in some cases its non-manifesto) into legislative proposals, there is normally time for the introduction of law reform measures. Thirdly, of course, a private Member can take up a particular Law Commission Bill, which is already drafted for him, and enlist the support of the necessary Government department to get it pushed through.
But this haphazard arrangement is not good enough for the modern day. There should be a systematic and continuous process, both on the aspect of consultation and on the enactment of such legislation. I am indebted to a number of meetings with various people, and to lectures and annual reports by the Law Commissioners for setting out the problems, as they have seen them; and, indeed, to various articles. I want to deal with some of the problems that arise, and with the kind of solutions that I see to them.
The criticism is often made that departments of state, though the Law Commission's working papers are submitted to them, are loath to comment or criticise until the Law Commission has, in fact, reported. Therefore, the Law Commission very often makes its official report and drafts its Bill, without knowing what will be the attitude of the particular Government department that is affected. We think there should be a requirement that the Government department which is affected should provide detailed comment and criticism within six months, at the outside, following receipt of a working paper by the Law Commission. I ask the question rhetorically: why should the Law Commission be made to publish its final report in ignorance of the views of an affected department, and to draft its Bill accordingly?
I have derived very considerable help from the

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Australian Senate report on this subject. The report is entitled Reforming the Law: Report of the Senate Standing Committee on Constitutional and Legal Affairs. This report deserves very careful consideration in this House; and we have been thinking along these lines. Of course, your Lordships have Standing Order No. 48 which reads:
"There shall be a Select Committee consisting of twelve Lords, who shall be appointed on the recommendation of the Lord Chancellor at the commencement of every session, to join with a Committee of the House of Commons as the Joint Committee on Consolidation etc. Bills",
and then its powers are defined. It sems to me first, that the powers of this Joint Committee of both Houses could be widened very considerably. This committee has the ability to consider certain enactments emanating from the Law Commission, but its powers are very curtailed and I am sure that everybody who has looked into it will agree that they are very limited. It seems to me that these powers could be very greatly extended and the committee could be enlarged very considerably.
Secondly, we think that the Law Commission's working papers should be sent to this committee at the same time as the working papers are submitted to Government departments. Thirdly, this committee should have the power at that stage to call witnesses, hear evidence and direct that further consultation should take place. Of course, further consultation would not be necessary in most cases, but there are certain aspects of law reform that are of immense importance to the general public, and the Joint Committee should have the ability and power to order further consultation.
Fourthly, at the conlusion of this process, the Government of the day should be called upon to indicate whether they accept the reform, in principle, and the Opposition parties, who would have representatives on the committee, could also indicate whether they accept the reform, in principle. The Law Commission could then prepare its final report and Bill. By that time, a great deal of consultation would have taken place, the views of the political parties would be established and the decks would be cleared for the progress of the Bill in the future. Then the final report of the Law Commission would go back to the Joint Committee, who would indicate to Parliament how that legislation should then proceed: first, by the normal procedure of enactment; or, secondly, by way of Second Reading Committee procedure, which has been used in certain cases.
In many instances, it would not be necessary to take the detail of Bills on the Floor of this House, as we do at the present time, nor would it be necessary in the House of Commons. On the other hand, where the Joint Committee have clearly indicated that the matters are controversial, a different kind of pathway through Parliament could be envisaged for a Bill. It would, therefore, be possible to isolate those matters which were truly of controversy, and we could use the time of the Houses of Parliament much more effectively.
Lastly, we would suggest—and these are only suggestions at the moment—that for a particular type of legislation, so certified by the Joint Committee, it
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would be possible to carry over from one Session to another the legislation which had not concluded its course through Parliament; save, of course, when a general election intervened. It seems that this would, therefore, be a much better way of utilising the time of Parliament. It is useless for our House to say, "So much legislation is held up for lack of time, because, through our parliamentary machinery, we do not make time available for it." That is the truth of the matter.
I should like to continue developing our views on other matters, but I shall not trespass upon your Lordships' time, save to say that I am sure that, in all parts of the House, there is general support for the sentiment expressed by the noble Lord, Lord Renton, in his Motion today. It is in the interests of this House, and in the interests of Parliament, that we make sure that our machinery is effective to meet the demands of our modern age.
3.57 p.m.
Lord Denning: My Lords, I would endorse every word spoken by my noble friend Lord Renton. When I was called to the Bar nearly 60 years ago, the legislation for one year was in a volume of 300 pages. In 1980, the legislation was contained in four big volumes of 3,000 pages. Of the cases that come before the Court of Appeal or the higher courts for determination, 90 per cent. are on the interpretation of a statute; not on our common law any more, but on the interpretation of a statute.
I must say, going on to the second branch, that our legislation and our statutes are still appalling in their complexity. They ought to be in simple, plain language, so that all can understand. A day or two ago, I had to go to an event sponsored by the National Consumer Council on plain English. The award that I gave for plain English, if you please, was to the Customs and Excise for one of their pamphlets on VAT. The booby prize—the Golden Bull, as they called it—went to the parliamentary draftsmen for a statute passed by both Houses as recently as 28th October of this year. You would think it was a simple enough matter to increase the old fine of £400 to £1,000, owing to inflation, but it takes Section 38 of the Criminal Justice Act 1982, which is two whole pages. Subsection (4), which received the prize, contains 10 lines of print without a single comma, semi-colon or full stop. I shall read it:
"(4) An enactment in which section 31(6) and (7) of the Criminal Law Act 1977 (pre-1949 enactments) produced the same fine or maximum fine for different convictions shall be treated for the purposes of this section as if there were omitted from it so much of it as before 29th July 1977 had the effect that a person guilty of an offence under it was liable on summary conviction to a fine or maximum fine less than the highest fine or maximum fine to which he would have been liable if his conviction had satisfied the conditions required for the imposition of the highest fine or maximum fine."
What appalling nonsense for anybody to interpret!
I do not stop there. Your Lordships are aware of a much more practical subject which affects every person in this land: secondary action, and whether it is lawful or unlawful in the course of a strike. We had two cases in the Court of Appeal, Express Newspapers v. MacShane and Duport v. Sirs, on the steel strike. In the Court of Appeal we held that the secondary action

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which had taken place was unlawful. There had been picketing of private steelmakers who had no dispute at all with their staff. Unfortunately, in their judicial capacity the House of Lords held that the Court of Appeal was wrong. Nevertheless, the good advisers of the Government thought that the Court of Appeal was right. In Section 17 of the Employment Act 1980 they sought to restore our decision. But what a mess they made of it.
Section 17—I say it judicially—is the most tortuous section I have ever read. It defies understanding. It comprises two pages of print. The present Master of the Rolls has condemned it as quite unintelligible to any- body, even to a lawyer except when he has spent several hours analysing each subsection. That is not the right way to legislate upon such an important topic as this, which affects every individual in the land. There is nothing in the Employment Act 1982 which makes it any better, so the courts have still got to struggle with it. I hope they will manage it.
It comes to this, that language ought to be simple and clear. There ought to be not long but short sentences. There should be a few commas and semicolons in sentences. There should be simple words. There should not be too much detail. One of the troubles is that with the best of motives the draftsmen try to think of every contingency that may happen and then to cover it by means of wording like this. It is impossible to think of everything that will happen in the future. All this ought to be in simple language, expressing principles. There is no need to go into all this detail. The courts should then be allowed to deal with it, as I am sure they have in the past.
An example from the Treaty of Rome concerns the way in which their treaties are dealt with and interpreted. They call it—an awful phrase—the aetiological method or the schematic method. They mean that one ought to be guided by the purpose and intention of the legislature. That is the way in which it ought to be interpreted. The Bill of the noble and learned Lord, Lord Scarman, did not get through on this point. I hope that in future judges will look more and more for the purpose and intention of the legislature. The draftsmen will therefore have to avoid all the detail and get down to simple principles. I endorse everything that the noble Lord, Lord Renton, has said.
4.4 p.m.
The Earl of Selkirk: My Lords, it is a great honour to speak after the noble and learned Lord, Lord Denning. Whatever his loss to the courts may be, it will be a great advantage to us in this House to have the benefit of his wisdom and experience on many subjects. I want in particular to thank the noble Lord, Lord Renton, for opening the debate but, much more, to thank him for the great work he has done over a very long period on this subject. His contribution is one for which Parliament should be extremely grateful. I have no doubt he will continue it. We are grateful to him for doing so.
His recommendations on Scottish legislation have resulted in an improvement, so far as I am able to judge. Whether or not Scottish departments are brought in at an earlier stage of the discussion of Bills
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affecting both England and Scotland, I cannot say. I shall be interested if subsequently the noble and learned Lord the Lord Chancellor is able to comment on that subject.
I want to restrict the scope of the debate for a moment by dealing with one specific case which has irritated me on a number of occasions. Whenever a principal Act is amended for the second time the draftsmen say, "It must be amended in terms of the Act as amended". There is reference to the principal Act, but the words to be inserted fit the principal Act, as amended. In terms of the principal Act that is complete nonsense. There is no ready means of finding your way from the principal Act to the amendment to it. I admit that there are the statutes in force, but it is a labour to go through those and makes the examination of statutes, not only in this House but elsewhere, afterwards, much more difficult. I believe that some reference to the first amendment ought to be made.
We have made great progress in certain directions. I pay my respects, as have other speakers, to the noble and learned Lord, Lord Gardiner, and the Law Commission. We have also done great work on consolidation. I have had the privilege on more than one occasion of serving on the Consolidation Committee and I am deeply impressed by the quality of the draftsmen who have to deal with consolidation. Nevertheless, I am afraid the blunt answer is that this is not enough. The noble Lord, Lord Renton, quoted Pope. May I quote the great Scottish institutional writer, Lord Stair. He said that the quality of Scottish legislation was based on custom. He went on to say, "We are not involved in the labyrinth of many and much statutes". People must give more implicit faith to their judges and to their lawyers. That was 300 years ago. We are right in that situation now. We have long, labyrinthine statutes which we do not know how to handle.
I found one aspect of the report of the noble Lord, Lord Renton, very depressing. He stated frankly and clearly what the problem is and what he thought ought to be done. Then he gave an absolutely conclusive answer as to why it cannot be done. That is very much the position in which we find ourselves today. Wherever we go we find that there is a good objection. As I read it, the problem today is that we have in politics four radical parties. They are all radical in their own way. They all want to do a lot and the main method of change is through the law. In order to get the timing right there will be a conflict between the radical parties and the possibility, within a reasonable time, of doing what you want to do. The only way which has been suggested—the noble Lord, Lord Hooson, also suggested it—is to take some of the work away from Parliament. But thereby you diminish the sovereignty of Parliament. That is the essence of the problem.
Are we to achieve better legislation by taking the work away from Parliament and thereby to reduce the sovereignty of Parliament? I do not believe anybody would accept that suggestion. Let me take Lord Denning's example. If one goes to the Library and looks at the statute books, one finds that 100 years ago there was just one slimmish volume. It was broken into two in the 1920s and into three in the 1970s. In

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the early decades of the next century there will be four, and no doubt at the end of the next century there will be five. That will bring the whole concept of the law into disrepute. Nobody can possibly be expected to read great volumes and still retain respect for the law.
We have got to think even more radically about what we are going to do if we are to retain respect. Many statutes could certainly be made neater, tidier and simpler. Much of the work will have to be taken away from Parliament, in one way or another, in order to get the time. The noble and learned Lord, Lord Elwyn-Jones, spoke about time. The noble Lord, Lord Hooson, said that there was not time, but then he went on to say that perhaps there was time. I do not know. The only way one could make time would be by making a Session last two years instead of one year. But I doubt if one could trust any Government not to fill a two-year Session equally full of legislation, and I believe that Parliament would not stand for that.
What else can be done? Much of our legislation is a matter of organisation. It has to do with running education, with running hospitals, with running museums—as was the case yesterday. Many of these matters do not give rise to great problems of jurisprudence. They are essentially questions of organisation. Perhaps some of these matters could be dealt with, at least in their preliminary stages, in a different way. I will not add anything more because we are running a little short of time. But I do believe that limited improvements, even in wording, will not be adequate to meet the problem we are facing today. If change is to take place, we have not the time in the current Session to carry it through.
4.11 p.m.
Lord Harris of High Cross: My Lords, I join others in thanking the noble Lord, Lord Renton, for initiating this debate. I must express the joy that I, and I am sure several others, felt at the lucid brevity of the speech made by the noble and learned Lord, Lord Denning. Perhaps I should start almost as a maiden speaker, by asking for the indulgence of noble and learned Lords who bring such legal distinction to our discussion of the quantity and quality of legislation. As a mere economist, my approach will be somewhat more down to earth—although others may wish to describe it rather differently. As the noble and learned Lord, Lord Elwyn-Jones partly implied, much of the indiscriminate multiplication of statutes has aimed to improve our economic and social welfare, yet it has conspicuously failed to usher in the promised millenium.
In economics we have a serviceable law of diminishing marginal utility. It is the neglected foundation of much economic analysis and tells us that increasing supplies tend to decrease the value or satisfaction we derive from any line of consumption. So it has proved with legislation; the growing volume has led to diminishing utility. There is, fortunately, no dispute among us about the long run tendency for the quantity of legislation to increase. With 3,100 general public Acts in force plus 13,000 general statutory instruments, it is surely not inappropriate to talk of an
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over-governed nation sinking in a morass of regulation and control—much of it wholly incomprehensible to the layman and, apparently, even to the noble and learned Lord, Lord Denning.
I am not a wild anarchist. I regard law as the indispensible buttress of all our prized freedoms, but one can have too much even of so good a thing. We have carried the necessary ordinances to the point of inordinacy. It is an example of the same undisciplined tendency to excess which Sir William Rees-Mogg has blamed for monetary inflation. The lesson for me is that we urgently need to restore limits to both the activity and the ambitions of modern government.
I believe that the best guide for the reforming efforts of lawyers, economists and others may be found in the seminal trilogy by Professor Hayek entitled Law, Legislation and Liberty. Even if time allowed, I am not qualified to do justice to Professor Hayek's grand thesis. But I found helpful his distinction between law. as the evolution of general rules of just conduct, and legislation, as the often arbitrary commands of Governments vested with temporary authority to impose their will or even their whims. Thus legislation is often linked only rhetorically with any universal, permanent principles of justice, of equity or indeed of law itself in its original meaning.
Hayek is not the only economic philosopher to diagnose legislative incontinence as the occupational hazard of politicians in a democracy. The economic analysis of politics starts from the commonplace observation that politicians are not wholly disinterested in gaining votes. Of course they have long-term ideals, and I understand that some even have principles. But such intellectual baggage tends to get mislaid or left behind in their natural haste to win a majority. The simplest way to amass votes at one time was for politicians to buy them. But since open corruption was made illegal—and was anyway expensive—the next best thing was to buy votes with promissory notes, politely referred to as election pledges.
Instead of bidding for individual votes, parties have come to seek wholesale support from large or powerful groups such as trade unionists, farmers, old-age pensioners, tenants, owner-occupiers, and other significant minorities. The method is to pass laws conferring privileges or immunities on sufficient special interest groups to build up a winning coalition of votes. One reason why politicians are vulnerable to pressure from lobbies of sectional interests is that democratic governments are thought to be omnipotent. They have unlimited powers to pass laws to remedy every passing grievance, real or imagined. As we now see, when the ruling party withholds its favours, an irresponsible Opposition will stand ready to promise to oblige after the next election. Thus, unlimited government has unchained insupportable demands of the populace and has brought nominally all-powerful government to the brink of impotence.
By a different route to that taken by the noble and learned Lord on the Woolsack in his remarkable Dimbleby Lecture, I have come to follow Professor Hayek in favouring a written constitution. Its aim would be to entrench limited government—perhaps even by specifying limits on the discretion of politicians to spend, to tax, to expropriate, and maybe

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even to discriminate in favour of sectional interests.
All that is for discussion and for the future. Meanwhile, I should like from the Cross-Benches to commend the efforts of the All-Party Repeal Group, which encouraged the noble Lord, Lord Renton, to bring this debate before us. The Repeal Group offers a modest prospect of relief from excessive legislation by seeking the outright repeal of unnecessary or restrictive statutes. As the noble Lord, Lord Renton, said, we have made a start with the Bill of the noble Baroness Lady Trumpington. to end the Shops Act. After the Recess, there will be a chance to debate the Second Readings of the Rent (Abolition of Control) Bill introduced by the noble Lord, Lord Vaizey, and the Truck Acts (Repeal) Bill, which I introduced recently. Like Ko-Ko in "The Mikado" we have a little list of society offenders that never would be missed, and we would welcome suggestions for statutes to be added to our list of worthy candidates for repeal.

Agriculture Council: 13th-14th December
4.18 p.m.
Earl Ferrers: My Lords, it may be for the convenience of your Lordships if I repeat a Statement which is being made in another place by my right honourable friend the Minister of State for Agriculture. The Statement is as follows:
"With permission Mr. Speaker, I wish to make a Statement on the meeting of the Agriculture Council on 13th and 14th December in Brussels, at which I represented the United Kingdom.
"The Council agreed to extend to the end of 1983 the arrangements for controlling imports of live cattle and pigs into Great Britain to protect our livestock against foot and mouth disease and swine vesicular disease. The special arrangements which apply to imports of live animals and meat into Northern Ireland have also been extended for a further year. During next year, the Council will discuss the introduction of rules for trade within the Community in live animals and fresh meat. We shall, of course, ensure that, when such rules are adopted, the special status of Great Britain and Northern Ireland is fully protected.
"The Council also discussed new provisions which would bring up to date the public health requirements for trade within the Community and with third countries in fresh meat. No decision was reached and the Council will consider this further at its meetings early next year.
"Agreement was reached on the 1983 arrangements for the importation of beef for processing. Next year's arrangements, including the quantity of 60,000 tonnes at reduced rate of levy, are the same as those for this year. These supplies are important to our processing industry and this means that imports can take place from the beginning of January.
"As the House knows, in October the Council decided the arrangements for imports of New Zealand butter in 1983. However, the French and Irish Governments indicated again that they are not prepared to adopt the necessary implementing regulation until the Commission have authorised exports to Russia. I made clear that there is no
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possible justification for the objections of these two delegations, which are an abuse of the Council procedures. There will be further discussion at the Management Committee before Christmas."
My Lords, that concludes the Statement.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Earl for repeating the Statement. In view of the need to protect cattle and pigs against the diseases referred to in the Statement, we welcome the further extension of 12 months. We also note the proposal to discuss the introduction of new rules for trade in live animals and fresh meat within the Community. Will the noble Earl now give the House a firm assurance that the Government will not approve any rules relating to foot and mouth disease which fall below the standards implemented by the Government following the report of the Northumberland inquiry after the outbreak of 1967–8, which was such a traumatic experience for many of us in this House? The noble Earl referred in the Statement to the words used by his right honourable friend, "special status of Great Britain and Northern Ireland". Is this what he meant when he used the words "special status"?
Can the noble Earl say why it was not possible to agree to new provisions on public health requirements for trade with third countries in fresh meat? This discussion has now been postponed, I understand, until next year. Are the Government now confident that some agreement can be achieved, and what changes in the rules do Her Majesty's Government support?
On the last paragraph in the Statement, the subject of New Zealand butter, while supporting the Government, can the noble Earl say what is the root of the French and Irish objection, given that these two countries accepted the arrangement with New Zealand when we and Ireland joined the Community in 1973?
Lord Mackie of Benshie: My Lords, I, too, would like to thank the noble Earl for repeating the Statement. I would strongly support the noble Lord, Lord Cledwyn, in asking the Government to ensure that our present standards are kept in any agreement made. There was a very interesting article in the paper this morning on the spread of foot and mouth disease in Estonia and Byelorussia, and 2,500 vets have inoculated 4 million animals in an endeavour to contain the spread of foot and mouth in that area. One of the great advantages that we have in being an island is that we have been able to keep up our regulations, and our slaughter policy has proved enormously beneficial and cheap. I sincerely hope the Government will stand by what they say in the Statement, and a further assurance will be welcome. I do not want to say anything about the fresh meat agreement. I trust again that the health of our livestock and livestock industry will be the main consideration.
With regard to butter, I wish the Government would come clean on this. Either we belong to the European Economic Community and support the common agricultural policy, which keeps up prices by intervention and sells the surplus in the world market, or we do not. It appears to me that if the country is

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busy selling pipelines and pumps for pipelines and turbines to Russia, and the whole world is competing to sell grain to that country, it is a bit hypocritical to hold up the commercial sale of surplus butter which the whole world is, if I may use the expression, hotching with, because of some objection which is not clear. Perhaps the Minister would tell us what he would do with the surplus butter if it is not sold on the world market?
Earl Ferrers: My Lords, what a fascinating question to be asked at the very end of the noble Lord's intervention. I am grateful for the welcome which both noble Lords have given to the Statement. Both noble Lords asked for an assurance about the special status of Great Britain with respect to foot and mouth disease. Of course, the idea of these discussions is to try to get a harmony of view. I can reassure the noble Lords that we will see that our unique position is fully protected in any arrangements which are arrived at.
The noble Lord asked what was going to happen about fresh meat. The aim is to reach a decision in January or February, and the latest proposals are acceptable to nine member states, including the United Kingdom. Therefore, I would not anticipate a great deal of difficulty there.
The noble Lord, Lord Cledwyn, asked what was the root of the French and Irish objection to the importation of butter. I suppose that really that question would be best directed to the French and Irish Governments. I think in general I can say that they are concerned at the importation of New Zealand butter when there is a surplus of butter within the Community. The noble Lord, Lord Cledwyn, is entirely right: they, together with all the other members of the Community, agreed that there should be special provisions for New Zealand butter, and that we intend to see continued. It is therefore wholly wrong for them to block the particular importation of butter at the moment. The reason why they would do this, as I understand it, is that they would wish to see the Commission's proposals for exporting butter to other countries. The noble Lord, Lord Mackie, said, why do not the Government come clean about the exporting of surplus butter? He knows perfectly well that it is a principle of the common agricultural policy that surpluses in the Community are exported on to the world market with a restitution. There is a genuine world market in grain; there is not such a genuine market in butter. When the Russians invaded Afghanistan we took the view, and the Community took the view, that to deny to Russia access to Community butter at advantageous rates would at least be a reflection of the abhorrence of members of the Community to that particular action. That is the reason why we have continued to retain our objections to the sale of butter to Russia.
Lord Molloy: My Lords, is the noble Earl aware that his remarks concerning our Commonwealth partner, New Zealand, will be very welcome indeed? I was pleased to hear that. I wonder if he will bear in mind that we hope we shall not enter into the fiasco that was entered into a year ago with regard to EEC surplus butter, when this country and New Zealand suffered when butter was sold to the Soviet Union at
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knockdown prices and a few months later repurchased for much more than it was sold for. It is this situation which makes people very angry indeed.
Earl Ferrers: My Lords, the noble Lord, Lord Molloy, is perfectly right; this is a politically sensitive issue, and it is a personally sensitive issue. We wish to see this matter dealt with as fairly, as properly and as reasonably as possible.
Lord Collison: My Lords, the noble Earl and Minister will understand that we are all pleased to learn that the safeguards against importation of foot and mouth disease are going to be extended in this country for a further year. I am concerned with the long-term future. What are the prospects of the other countries of the Common Market accepting similar restrictions on the importation of cattle as we are now enabled to do under our special arrangements?
Earl Ferrers: My Lords, in the United Kingdom we have had this derogation for six years and we have it for another 12 months. I hope, and it is the hope of the United Kingdom Government, that during that time we will be able to come to arrangements which are suitable not only to other members but also to the United Kingdom, bearing in mind the special status which we have. The noble Lord, Lord Collison, will, of course, be fully aware that one of the problems is that it is only the United Kingdom, Ireland and Denmark who have a slaughter policy. We have that policy for very good reason. It is seeking to dovetail that policy with those countries which do not have it which causes the problems. I am hopeful that we can come to an agreement that will be suitable to all member states.
Lord Walston: My Lords, I trust the noble Earl will not mind if I say that there does not seem to be a great deal of meat in this statement. In fact, if one could change the metaphor, he promises us more jam. if that is the right word, tomorrow than any decision today.
The only question I should like to put to the noble Earl is whether this 60,000 tonnes of meat which is to be imported, and which the Statement tells us is the same as last year, will come from the same countries as last year and that, in particular, the position of Botswana and some of the other Commonwealth countries has been safeguarded, as in the past?
Earl Ferrers: My Lords, the noble Lord, Lord Walston, is entirely correct. There is not a great deal of meat in this Statement. My right honourable friend thought, as is his practice, that the customary and proper thing to do is to inform the other place of the discussions which have taken place and the conclusions, such as they were, arrived at during the last Council of Ministers meeting. It was considered appropriate for that Statement to be repeated here. The noble Lord is right in saying that there are not too many conclusions. With regard to the specific point about Botswana, I will find out the answer to his special question and contact him.
Lord Davies of Leek: My Lords, while thanking the Minister for his Statement and recognising the constructive work that has been done and the need for

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protection from foot and mouth disease, may I ask: does the Minister consider it relevant for me to ask whether anything was discussed on the subject of what are known as "bobby" calves.
Earl Ferrers: My Lords, that does not strictly come under the foot and mouth regulations. There are regulations which control the movement of calves, but they do not come under those for foot and mouth disease.

Legislation
4.33 p.m.
Debate resumed.
Lord Denham: My Lords, I am not encroaching on the very strict ration of time remaining for this very short debate because the clock will not be restarted until I sit down, but I thought it might be useful to inform your Lordships at this point that there are exactly 56 minutes left before my noble and learned friend must rise to reply. As there are six Back-Bench speakers left, the ration per speaker, if each speaker is not to encroach on the time of his successors, is nine minutes exactly. My noble and learned friend must rise to reply at exactly 5.29 p.m., or before.
Lord Mancroft: My Lords, back from the surplus of butter to the surplus of legislation, I take careful note of what my noble friend the Chief Whip said and will, therefore, stick to one point and one point only. It is my view that one of the reasons why we have such a complexity and gallimaufry of legislation is our wasteful misuse of parliametary time. We invariably end any major and complex Bill in an undignified canter. I should like to see some arrangement—and it should not be beyond the wit of a man, or woman, to devise it—whereby just before the Bill passes on to the statute book it is withdrawn from Parliament to allow all those concerned, the draftsment in particular, to have a quiet look for a few days at what was originally a workable Bill and has become an unworkable Act.
Let me consider a mythical Bill—the Rats and Mice Bill. It was in the manifesto—it does not matter which party—and was mentioned in the Queen's Speech. It has gone before the Home Affairs Committee and the Cabinet and has been discussed. It is well known to Parliament, the public, the press and the Civil Service. It is then handed over to the parliamentary draftsmen to draft. I listened with care and admiration, as I always do, to the noble and learned Lord Denning's splendid swipe at the parliamentary draftsment but I hope that he will be fair and remember that the great Sir Benjamin Cherry's drafting of the 1925 property legislation is still regarded widely as an absolute masterpiece. But to concede his point. I remind him of the ill-fated Shops Bill, which I was personally concerned with at the Dispatch Box and which never became an Act becuause your Lordships would have none of it. It took 19 lines of the draftman's sparkling prose to establish the principle that only a Mohammedon or a practising Jew could operate as a barber in Scotland on a Sunday.
The Bill, then, comes before the House. I hope it
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comes before this House first, because the more legislation which comes before your Lordships' House first, the better. It then goes through seven stages, in five of which it is capable of amendment. It then goes to another place where, as we have already been told this afternoon, there is the risk of all-night sittings, legislating in the small hours of the morning and possibly a filibuster—if that is not an unparliamentary word to use—and possibly even a sudden parliamentary crisis.
Then comes the ping-pong between the two Houses—"that the Lords do agree with the Commons in the said amendment", and so on. Finally the Whips start getting worried and say, "If we do not have the Bill by next Wednesday it will be lost." It is at that stage that I suggest the Bill is sent back to the draftsmen and that it is said to them and all others concerned, "Is it not a fact that Clause 17 and Clause 32 cancel each other out completely? Is Clause 45 so complex that not even the noble and learned Lord, Lord Denning, can make anything of it?" I believe that such an arrangement would mean that the Bill might, with luck, become a much more workable Act. We will have had the chance to sit back and look at it quietly to see whether we can tidy it up before it finally gets on to the statute book.
We have been talking about a public Bill. The Private Bill, of course, is a law unto itself. But what about the Private Member's Bill? This is quite an important Bill in your Lordships' House. I remember listening carefully to the noble Baroness who leads us warning us in the debate on the Queen's Speech that we were not to indulge in Private Member's legislation which was liable to waste the time of the House and would probably not even get on the statute book. I think that she perhaps had in mind the ancient Greek City of Locris. In the city of Locris, to introduce a bill in the Locrian parliament, one stood in the market place with a rope around one's neck. If the bill was passed everyone said "Well done, that man. Bully for you!" If it did not pass, one was hanged. To paraphrase Dr. Johnson, it would concentrate the parliamentary draftsman's mind wonderfully if he knew that a piece of bad draftsmanship would lead him to the scaffold in a fortnight.
The noble Baroness the Leader of the House might even have had me in mind, because the first Private Member's Bill I ever introduced to your Lordships' House took 11 years to get on the statute book. This was the Marriage Enabling Act which enables one to marry one's divorced wife's sister. Not many of your Lordships cared for my draftsmanship. I did it myself without any help, and that is probably why. There was one person who approved of it—a gentleman who lived in Manchester. He read about my Bill in the Manchester Guardian, as it then was. He had been accidentally married to his sister-in-law for several years owing to an oversight of the registrar. The marriage had not proved happy. He then proved, to himself, that the marriage was not legal. With a sigh of relief he folded the Manchester Guardian and went to live with a barmaid in Bridlington.
I make this final plea. If the parliamentary draftsman, who I think is a much underrated man, a very taxed and skilful man, is brought in, as he is, to help with the Public Bills, can he not occasionally be

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brought in to help with the Private Member's Bills? We know that help is occasionally given behind the scenes. We also know that if a Member has a Bill in his pocket which the Government approve of, they will, when no one is looking, put the draftsman at his disposal. I should like to see that done much more formally and frequently so that the standard of Private Member's legislation is raised and is able to contribute much more than it does to parliamentary progress in your Lordships' House. I must give the Chief Whip one warning: I have not only one Private Member's Bill in my pocket at the moment; I have two.
4.40 p.m.
Lord Molloy: My Lords, this has been for me an extraordinarily interesting debate because I thought that, not being a lawyer, all I could do was put the views of ordinary people. Then to my absolute delight I heard part of the speech that I had hoped to make and the theme of it put by the noble and learned Lord, Lord Denning. I wish to comment on what he had to say later.
First, I should like very sincerely to compliment the noble Lord, Lord Renton, not merely on introducing this particular debate, but on the manner in which he did so. It was not particularly difficult for him. I have listened to him in another place tearing the draftsmen's work to pieces and putting in much more sensible phrases designed for ordinary people to understand. Therefore, no one is better equipped than the noble Lord, Lord Renton, to introduce this issue.
However, we are now in a very difficult situation and we have somehow or other to sail between the views of the noble and learned Lord, Lord Denning, and the defence of the noble Lord who has just sat down. It will not be easy. When one speaks to ordinary people they, like the Master of the Rolls, say: "What appalling language you people use when you are making Acts of Parliament". When we go to members of the same profession as the noble and learned Lord, Lord Denning, they say, "We must do it this way because"—to use their language—"there are so many shyster lawyers who wriggle around and escape the meaning of the Act"; and they are right.
When the noble and learned Lord, Lord Denning, spoke about the secondary picketing of the steelworkers he was, in my judgement, correct. I do not agree with the law, but it is the law. If the law is not adhered to—it does not matter how much we disagree with it and have opportunity to seek to change it—we are on a very dangerous course indeed. It may be hurtful; it may be harmful; it may be annoying, but it has been passed by Parliament and that is the law. I view it in the same way as ordinary people. Ordinary people say to me, "There is no problem in sueing a couple of chaps in our street who are on the dole and cannot pay their rent; no problem at all. There is no problem in sueing someone and having him before the courts because he cannot pay his rates; no problem at all. But you cannot get any of those who yearly twist this nation out of £9 billion as regards money they ought to pay in taxes. You catch the working class man because he pays his tax through PAYE." They ask us, "What are you going to do about it? Is this going to go on and on? You make your pious speeches in the
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House of Lords and in the other place about the villainy of the black economy, but the only thing you do"—and I ask the noble and learned Lord, Lord Denning to bear with me—"is to stop a good policy like the 'fares fair' policy of the GLC which did so much good in taking traffic off the roads and allowing ordinary people to travel cheaply". That was not the fault of the Law Lords who had to examine it; they had to examine the law. So, in that instance, it would appear that the parliamentary draftsmen had fallen down.
That is the point that I wish your Lordships to understand and I believe that it is the very issue to which the noble Lord, Lord Renton. referred when he talked about the quality of legislation. There must be something wrong one way or the other with the quality of legislation when it is examined by top lawyers, drawing massive fees, employed by the Greater London Council, who are told, "Yes, you can go ahead with this," and then their mates a little higher up the tree say, "You have broken the law". That is the type of thing that brings Parliament into ridicule and that is the main issue when we are talking about the quality of legislation.
As the noble and learned Lord, Lord Denning, so correctly said, ordinary folk cannot understand why we do not use simple, ordinary language. I have to give the argument of QCs and judges. Although the sharks in the City—those patriots who take their money out of this island (money which they have made here) to escape taxation—want a bigger army, a bigger navy and many more missiles, they expect the man in the street to pay for them. That is the ordinary person's view of some of our legislation and that is what we have to look at.
We all make utterances from time to time which are quoted, and if you are particularly eminent you are widely quoted. I received so many letters when working in the other place when I said that people might disagree with what we had decided to do, but we had made it quite clear in our manifesto. I have heard our present Prime Minister say the same thing. Ordinary people say to me, "When you lot say that, the Master of the Rolls tells us all to disregard manifestos". So not only legislation but sometimes the way in which we act has to be considered extremely carefully. So those people—not the ordinary people—who wish to cheat and the crooks who wish to take advantage either of the law or, if I may say so, of a lapsus linguae will latch on to something which will help to show that we really do not know what we are talking about in this place.
I believe that it is that kind of thing that brings Parliament into disgrace, and that is the fundamental point that was made by the noble Lord, Lord Renton, so ably supported by the noble and learned Lord, Lord Denning. I am delighted to support the noble and learned Lord, Lord Denning, in what he said with regard to using ordinary language. I do not believe that it is beyond the wit of draftsmen or the capacity of this Parliament to use ordinary language and not allow the shyster lawyers to make fools of us in the courts and fools of those who are sitting in judgment. That is a point that we must consider very seriously.
Many people do not argue so much that there are

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too many laws. I was astounded when the noble Lord, Lord Renton, mentioned that we are trying to operate something like 3,500 Acts. I expect that all your Lordships have heard from time to time—I certainly used to hear this and I know that the noble Lord, Lord Renton, and those who have served in the other place have heard it—someone who is aggrieved about something saying, "There ought to be a law for it" or "There ought to be a law agin it". So when it suits their purpose they want more laws and they also want less laws. I can readily understand their difficulties.
Time will not allow me to go into some of the matters that I wanted to raise about EEC legislation, which wants looking at very hard indeed. It seems that at times it clashes with our legislation and then we are compelled by the Treaty of Rome. I understand that one can read on the front of any copy of the Treaty of Rome a little warning like that on a packet of cigarettes that the wording and the interpretation of the Treaty of Rome cannot be guaranteed as being accurate. Ordinary folk say, "What are you doing about this? This is the kind ofthing you should be looking at. We want to know where we stand." You must not say, "Well, people like you shouldn't go and buy the Treaty of Rome and look at it and study it; this is a matter for parliamentary draftsmen and lawyers." You cannot give them that answer.
I want to turn very briefly in the limited time that I have left to legal aid. This also comes within the ambit of the quality of law and the quality of parliamentary intention. I do not understand legal aid and I am waiting for that great day to come when some eminent lawyer will understand it. I worked in the other place and had so many interpretations from so many renowned figures of the legal profession that I can quite understand why ordinary folk do not understand it. As the noble Lord, Lord Renton, said there are many lawyers who really do not understand it because of its complicated language. If Parliament had the desire that ordinary people should be helped, then I believe we must agree that we must make the quality of law a high quality and be interested in what happens after we pass the laws. We should make sure that the law is not only carried out properly in criminal cases, but is carried out properly as regards helping people in the way good laws should.
I come to my last point. It will come in due time, but, with the massive, complex legislation that we have, ordinary people get into trouble even if they have signed a contract. We all know cases of what I call shyster contracts containing small print; they can get away with that. But if you do not pay your rates you are inside, pronto, with no messing. If you work a flanker on millions of people and cheat them, it would appear that even with all this complex law we cannot do anything about it and you get away with it. This is the sort of thing which we have to look at very carefully. I hope that the day is not too far distant when we can help ordinary people in the complexities of their lives with regard to the law. Perhaps local authorities might employ a number of solicitors to whom people could go and receive help and guidance, just as they do when they call a doctor under the NHS. If that were to happen, I believe it would compel us to ensure that the quality of our law was improved to the satisfaction of most people.
4.51 p.m.
Lord Simon of Glaisdale: My Lords I should like to associate myself with the congratulations to the noble Lord, Lord Renton, and with the gratitude that has been expressed. If, owing to the shortage of time, I make my submissions to your Lordships rather baldly, I hope that your Lordships will acquit me of discourtesy.
First, I want to deal with the quantity of legislation. I venture to think that that is very much bound up with the philosophy of government. The quantity of legislation tends to vary directly with the quantity of government, and unless a determined effort is made to devolve decision-making to the individuals concerned we shall continue to have the evils of quantity of which complaint has been made this afternoon. I so much agreed with the noble Lord, Lord Molloy, that it is most important that the ordinary person should be able to follow that law, if only because ignorance of the law is no excuse.
Secondly, departments very naturally—because it is part of their job—like to tidy up the sphere of responsibility for which they stand. They all have a number of useful Bills on their shelves waiting for implementation, and those jostle with each other before the Future Legislation Committee. I venture to suggest that the test of the Future Legislation Committee should not be, "Is this Bill, on balance, advantageous?", but, "Is this Bill really necessary?" Obviously, a test like that is the one which is applied in the final Session of a Parliament, and is probably one congenial to the political philosophy of the present Government. So I suggest that it might be more generally applied by those who make the complaints and who hear the complaints that have been made today.
The third matter which tends to excessive quantity is the ambition of politicians. Undoubtedly, reputations can be made by the ministerial handling of a complex and important Bill. One has only to think of Disraeli, Lloyd George and Neville Chamberlain. But, there again, it really rests with the Future Legislation Committee to be critical and cynical in that regard.
The fourth matter is that of reducing the volume of existing legislation. Consolidation has been dealt with by noble Lords who preceded me, but I want to ask about statute law revision Bills and statute law repeal Bills. A few years ago they were annual, and very valuable that was. I know that that was linked to the production of Statutes in Force, but perhaps my noble and learned friend on the Woolsack could tell us the present position.
My noble and learned friend Lord Elwyn-Jones was rather inclined to suggest that the Consolidation Committee could do more in the way of repeal, but, in fact, the broadest criterion that they can apply that is "of no further utility"; all the other criteria are much narrower. It seems to me impossible for a Joint Select Committee, such as that committee, to apply that to, say, the Shops Acts, the Truck Acts, the licensing laws or, even more, the Rent Acts, where the judgment is a political one. Therefore, it seems to me that if it is to be left to private Members to deal in those spheres, the private Member can legitimately look to the help of the department and the draftsmen. Essentially, I should apply that to Law Commission reforms; and I

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entirely agreed with what the noble Lord, Lord Hooson, said about that.
Then I come to the quality of legislation. It has already been emphasised that we would have much better legislation as to quality if, as my noble and learned friend Lord Denning said and as was said by the noble lord, Lord Molloy, the draftsmen would draft in general terms and in simple language. A notable memorandum was submitted to the Renton Committee by my noble and learned friends the Lord President and Lord Justice Clerk, which pointed out that the courts are perfectly capable of and perfectly used to applying general principles to particular instances. If the drafting were done as to general principles, then the legislation would not only be more perspicuous, but would also be very much shorter and much fairer to the ordinary citizen, and, I venture to think, in the end much more effective for the Ministerial purpose.
The noble Lord, Lord Renton, was inclined to exempt Finance Acts, where he said that it is impossible to avoid a good deal of detail. I respectfully suggest that "impossible" is too strong a word. Other countries manage to achieve much simpler Finance Bills and Finance Acts than we do. They do it in two ways. We seek absolute fiscal justice for the individual. Many other jurisdictions in the Anglo-American sphere of law take the rough with the smooth; that there should be general fiscal equity, but it may be that in a particular instance one taxpayer may be under a greater fiscal liability than another. The other is general legislation against tax avoidance instead of the particular instance. Again, other Commonwealth legislatures legislate in that way, and so does the United States. If that were done, even a Finance Act would be much simpler.
Finally, I would say this. A lot of trouble is sometimes caused by a Minister being asked what is the meaning of a provision, and saying, it being a case of doubt, that his understanding, his advice, is so-and-so. We had one example of that in the case of the Race Relations Act, when it was a matter of great complaint and great hurt, I know, to subjects who thought that the law had failed to reach them when the law was declared to be as the Minister had said was his understanding, but it had not been written into the Act. I suggest that it should be a parliamentary convention that in that situation the law should be made absolutely clear.
5.1 p.m.
Lord Airedale: My Lords, sandwiched as I am between two distinguished lawyers I only make bold to make one point in relation to statutory instruments. The Joint Committee on Statutory Instruments, in paragraph 25 of their 6th Report for the Session 1981/82, mentioned that some statutory instruments are drafted in relation to other documents, so that the instrument itself is scarcely comprehensible unless you have available the other document to which it refers. The committee expressed the opinion that in these instances the second document required ought to be available at the Stationery Office along with the statutory instrument itself.
Yesterday there came before the Joint Committee
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an instrument which referred to two other documents. If a member of the public had gone to the Stationery Office in Kingsway for the instrument and had read the explanatory note to it, he would have found that the second document he needed could be obtained from Pentonville Road in north London and the third document he needed could be obtained from the Home Office Library near Waterloo. I do not call that a satisfactory service to the public.
I know that it is the will of Parliament that the Stationery Office is to be regarded as a commercial organisation rather than as a provider of services to the public, but there are exceptions. I understand that Hansard is not a commercial proposition and needs to be subsidised. I hope that in other fields, too. the service to the public aspect is not being lost sight of in the anxiety of the Stationery Office to turn itself into a commercial success, so I hope that this recommendation by the Joint Committee finds favour and is going to be implemented.
5.4 p.m.
Lord Campbell of Alloway: My Lords, may I too express my own gratitude among your Lordships to my noble friend Lord Renton not only for having introduced this important subject for debate, but for having adorned it with his unrivalled expertise. But must we not first seek to identify the causes in this deterioration of quality in legislation before we may propose a cure? Must we not also, as appears from so many of your Lordships' speeches, retain the true and essential perspective that the maintenance of the rule of law requires—no, my Lords, demands—intelligibility? Is it not much to be doubted whether this volume of legislation as such, whether these extant deadwood statutes as such, cause this deterioration in quality as distinct from constituting mere contributory factors?
I would have submitted that the causes are essentially three. Is not the intricate draftsmanship with which public Bills are cast in their legal mould, the direct result of the nature of the instructions from Government departments on the one hand, and the way in which these are interpreted by the draftsmen on the other? True, we do not know the draftsmen's side of the story. I can assure the noble Lord, Lord Molloy, that assuredly they are not to be called, or referred to as. shyster lawyers.
Let me give one example on each side of this fence. The nature of the departmental instruction is the sort of "Yes, Minister" syndrome of what they call judge proofing statutes, which is done so as to seek to ensure that there shall be no judicial discretion in the implementation of the intendment. This has been referred to as the unbridled passion for detail; the vain search for certainty—and that by my noble friend Lord Renton; and the noble and learned Lord, Lord Denning, also adverted to this.
On the other side of the fence, giving one example of each side, there is the position of the parliamentary draftsmen who resort to the practice of relatively recent origin of amending existing statutes instead of repealing and re-enacting in amended form. They seem to pay no regard to what has been referred to by my noble friend Lord Renton as the statement of

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principle, the purpose clauses, and the forward looking concept towards intelligibility. That is surely one of the causes. Another must be the dearth of parliamentary draftsmen, who are desperately overworked and who, not only by the nature of their instructions but by virtue of their calling, are predisposed to over-indulge in these arcane and esoteric practices. On Private Bills the withholding of the services of parliamentary draftsmen, save on the authority of Her Majesty's Government, is, in submission, a cause of poor quality in legislation.
If such be the causes, or if such be three of the causes, what about the remedies? I take aboard most of the suggestions made by the noble and learned Lord, Lord Elwyn-Jones. I also adopt, with respect, if I may, the observations of the noble Lord, Lord Hooson, where he takes the point that the machinery warrants an overhaul. At one point your Lordships may have thought that he was saying that it really wanted replacement. Taking aboard his point on machinery, perhaps we should set up some system of quality control, with powers to discourage resort to those practices. A Joint Standing Committee? Perhaps. The six months concept of the noble Lord Lord Hodson? Perhaps. Enlarge the powers of the Joint Consolidation Committee? Perhaps. But something should be done.
Secondly, could we not—although we have made considerable progress in this sphere—intensify the activities of the Law Commission on recommendations for appeal and implement such recommendations? As the noble and learned Lord, Lord Simon of Glaisdale, said, there is considerable scope here for producing legislation which satisfies the needs of Government departments, and the noble and learned Lord speaks from experience.
Perhaps we should take on more parliamentary counsel or, as my noble friend Lord Mancroft suggested, make parliamentary counsel available on Private Members' Bills, at all events before the Committee stage. Perhaps we could use the two parliamentary counsel who are seconded to the Law Commission. That would follow the practice of many other countries, such as Canada; a posting box might be set up, or an office, within the precincts of the Palace. Consideration might also be given to the practice adopted since 1971 in the other place, of providing expenses for drafting for the first 10 Bills of the Private Members' ballot. That situation could be updated to meet modern requirements and be extended to your Lordships' House.
If the co-ordination and supervision of such remedial measures envisages some new dimension of Government, so be it. The security of the quality of legislation is, in submission, the debt of Government a debt long overdue for payment and a debt which must now be paid, for if the signs of distress in the foundations of our society are not treated, then surely the stone shall crumble beyond the reach of all hope of restoration.
5.14 p.m.
Lord Scarman: My Lords, I shall not stand long between the House and the speech to which we are looking forward from the noble and learned Lord on the Woolsack. First, I must apologise to the House and
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my noble friend Lord Renton for being unable to be present for the early stages of the debate. As I think has been explained, but I repeat, I was detained by judicial duty.
All I wish to do at this late stage is to suggest that the House, and indeed our country, should concentrate more on the quality of legislation than protest about its quantity. English law has—it is a very good thing it has—been based more and more on statute law. Without statute law, our society could not have moved from its rural condition at the beginning of the 19th century, through the industrial revolution, through two world wars in the 20th century and now be negotiating the technological and electronic revolution. It is quite unreal to say, "Let us reduce the quantity of statute law". The truth of the matter is that the modern scientific, social, economic and political changes in our society have been made possible, have been controlled and have been fitted into our society thanks to statute law, and we must keep that in mind.
The common law is delightful, but it is now of marginal importance only. Similarly the other source of law. the decisions of the judges, again, can play only a peripheral part in keeping the law in touch with modern developments. That is not to denigrate either the common law or the judges; it is just stating facts which must be plain to everyone if one just examines social, economic and political history. So quality is what matters, and the House is clear that it wants statutes drafted in more general terms, with more concentration on principle, and it wants to avoid the over-specificity of so much of our legislative drafting.
How can that be done? First, not by taking a swipe at the draftsmen. What we must do—this is all I shall do in the next two minutes—is just look at the genesis of a statute and see where we can introduce improvements. I am taking, of course, public Bills emanating from Government. First, there is the incubation stage, when they are being considered by Ministers, by departments and, in a preliminary way, by draftsmen. If at that stage a decision could be taken to keep the statute to the principle of the matter, it would help; but bear in mind what the implication of that is, and one has to accept the implication even though it is unpleasant for many.
If one is to legislate in general terms and on principle, then one must allow for a great increase in statutory instruments; namely, delegated legislation dealing with the detail of the matter. Why should one not do that, if it keeps the statute book clear and devoted to principle? And of course, if one goes wrong with statutory instruments, it is very much easier to correct them than it is to correct by amendment or repeal a statute. As I say, one has to accept a great increase in statutory instruments. They are, of course, either affirmatively or negatively under the control of Parliament, but that has to be accepted. I suggest it is a worthwhile price to pay to get our statutes in that intelligible form for which the noble Lord, Lord Molloy, rightly contended; namely, so that they can be understood by a reasonably intelligent, comprehensively educated Englishman.
The second period is when the statute is going through Parliament. It is no longer being incubated; changing the metaphor a little, it is being pricked out

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in the allotment garden, and now Parliament is looking at it in principle and at the amendment stage. I do not think I would advocate—I am no parliamentarian, except in my latter years—any abridgement of the study of legislation in Committee and the very careful study it gets. I believe this is peculiar to this country; other countries take it on trust, so long as they can have a debate about the principle. But I have now sat long enough in your Lordships' House to realise the immense value of the Committee stage, and we must accept that. However, if the legislation comes before the Committee as legislation of principle, then, the House in Committee will take its cue, and I think that that is the contribution that the two Houses will have to make.
Granted, therefore, that we can get legislation in simpler, broader, more principled terms, then it is enacted, and then it is handed over to the judges. The judges have a role in the legislative process—I would not say that that is quite right; rather they have a role in the process of ensuring that we have a clear statute book. Can one trust the judges? Will they really do what Parliament says? That was of course one of the purposes of my ill-fated Interpretation of Legislation Bill, about which I shall say no more because time is not here.
I agree with the noble Lord, Lord Molloy, and with the noble and learned Lord, Lord Denning, that, if one has statutes so drafted, the courts will have no difficulty in divining the purpose of Parliament, and interpreting them accordingly. I do not know what the Court of Appeal does, but I should like to assure the noble and learned Lord, Lord Denning, that the House of Lords has said that the basic principle of statutory interpretation is purposive; and that is enough if the statutes are drafted in the correct way. It can be done, and I suggest that it should be done. It needs merely a little self-restraint and self-discipline on the part of all the various institutions of our constitution.
5.22 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, the speech to which I have just listened from my noble and learned friend Lord Scarman has I think relieved me of a very great deal that I would otherwise have wanted to say. I shall not repeat it. It will be fresh in the minds of the House. I do not think that I could improve upon it, and therefore I shall say that with almost everything that my noble and learned friend said, I absolutely agree. I am sure that noble Lords who have borne with the debate will agree that we have had a most interesting, able, and at times witty, series of speeches. The lot of the Minister who has to reply to these short debates is that of the advocatus diaboli. Before I deal with the instructions from my client, I should like to thank the noble Lord, Lord Harris of High Cross, for reminding the House that I have occasionally adopted a different role; and that is not the role for which I am cast this afternoon.
In my attempt to speak on behalf of my client I had it in mind to say, first, that statutory instruments serve a useful purpose, despite their vast quantity, but that has already been said by my noble and learned friend Lord Scarman. I have it also in mind to say that the number of statutes is as a matter of fact diminishing.
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There were 3,680 in force in 1964. In 1974–10 years later—there were only 3,480, and as at 1981 (which is as far as we can get it) there were only 3,109 in force. That is a steady diminution, and it reflects the important work of statute law revision, to which my noble friend Lord Renton referred and to which there have been repeated references during the course of the debate.
I think I was asked by my noble and learned friend Lord Simon of Glaisdale—but if not, I was asked by another Lord—what is the present state of play about statute law revision. We have had 10 important such Acts on the statute book as the work of the Law Commission. I hope to have another ready for next Session, and that will get rid of a good deal of obsolete legislation. As the noble and learned Lords, Lord Elwyn-Jones and Lord Gardiner, will realise, we are working from the back upwards as we approach the present. The present work of statute law revision has been slightly held up by the fact that its principal instrument has been acting as the Secretary of the Law Commission and therefore has been able to address less of his time to this process.
Forty-eight of the Acts of this Parliament are consolidation Acts, and that. I think my noble friend Lord Renton will agree, is a thoroughly good thing. Therefore, speaking again on behalf of my client. I have to point out that about a quarter of the 3,000-odd pages that we passed in the last years have been consolidation pages, and so the terrifying figures of the quantity of statutues that we passed are in fact by that amount less to be counted. That is a fair deduction to put on the credit side of the account.
That said, I now have to go back and admit that for more than, I think, 300 years—I think from the time of Lord Bacon, but certainly for a very long time indeed—the statute law of this country has been held to be a scandal. It is at this stage that I want to pose a question. Are we (and I do not think that noble Lords who have spoken have quite grappled with this question) in the presence of a problem of drafting? In that case, of course, the attack of the noble and learned Lord, Lord Denning, on the draftsmen would be justified. Are we in the presence of a problem of interpretation? I shall not elaborate that unduly because it has not been very widely canvassed during the present debate. But I must add that I shared the regret of my noble and learned friend Lord Scarman at the rather frosty reception given to his own Bill, incorporating part of the Law Commission's recommendations, when he introduced it in two previous Sessions. On that, I would say only—and I think I am echoing, or perhaps expanding, what the noble and learned Lord, Lord Scarman, said—that I think the courts are gradually edging their way towards a more purposive interpretation.
When I first went to the Bar—which alas! was 50 years ago—literalism dominated the whole scene. It was not only in statute—that was only a particular example—but also in the construction of wills and the construction of contracts. Even with an unscrupulous young man trying to get the best he could out of his client's case, not even in the county court was much extraneous evidence admitted as to what the parties

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intended to achieve by a written contract.
However, I think it has been recognised, gradually, slowly, inch by inch, yet inevitably, that one cannot interpret any words, however apparently plain, except in a matrix of surrounding fact and circumstance; and that applies to statute no less than to anything else. I absolutely agree with my noble and learned friend when he says that the House of Lords has fairly laid it down that there is an important purposive element in any attempt at statutory construction which, as the noble and learned Lord, Lord Denning, said, represents about 90 per cent, of the work which comes before the appellate courts of this country.
There is, therefore, an interpretative element in the problem which we are discussing; but this brings me to the last part of my question. It is this. Are we not really in the presence of a political and constitutional problem which is endemic in our parliamentary institution to a greater extent than has wholly been realised? The noble Lord, Lord Hooson, in a most constructive, interesting and fresh-minded speech, thought that it was a matter of mere mechanics. I think that there is an aspect of that which one ought to consider but I do not think that it is a question of mere mechanics.
The first thing that I would say about it is that we must not forget that we are one of the largest, if not the largest, unitary states in the world. A lot of legislation which appears on our statute book would be legislated in the states of the United States, in the federal parts of the Soviet Union, in the states of the Commonwealth of Australia or in the provinces of Canada. But we have to legislate at Westminster for Scotland and we have to legislate on a vast number of things which in a federal system, for which we are almost quantitatively suited whatever may be the constitutional desirability of it, we would not have to legislate upon. Therefore, the pressure on us is infinitely greater and inevitably greater so long as we retain that situation.
The second thing that I would say—and here, again, I echo something which the noble and learned Lord, Lord Scarman, said—is that in the process of legislation the rights of the individual Member and the rights of the Opposition in the presence of an omnicompetent Parliament without a written constitution inevitably involve both a degree of precision and a degree of time consumption which at first sight might be seen to be time wholly wasted. The right of freedom is the right to oppose; and there are more ways of opposing than one. For instance, I have sat on the Opposition Benches as well as on the Government Benches; and if I wanted to stop the business of a Government of which I disapproved, I would very often take a lot of time improving in detail legislation to which I had no radical objection—and then there would be less time for the wicked things that they were doing over on the opposite Bench.
I know that I am not the only parliamentarian who has thought this thing out. How often when a Minister has said, "The courts will take a sensible view of this" have I heard the words from the Back Benches, "Well, let us have it written into the statute"? How often have I heard from Government supporters the words, "Of course, my noble friend (or my honourable friend)
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would not act in this way. But he will not always be in power. Suppose a Minister comes who has not his charm and his integrity. What use he could make of these loose and broad words!" How often have I heard that?
These are basically not questions of law, they are not questions of interpretation, they are not questions of judicial work and they are not questions of draftsmanship. They are constitutional questions. I pause for a moment, so as not to take up too much of your Lordships' time, simply to point out that our process of legislation differs fundamentally from that of other free countries. For instance, in France they have the Conseil d'Etât. They have what are called the travaux préparatoires to which reference can be made at a later stage in order to interpret the actual statute. The principle is basically this: that you get some of the bugs out of the legislation before you let it loose on Parliament at all.
Incidentally, when people question the use of your Lordships' House, quite apart from questions at issue between the parties, I myself occasionally point out that if legislation is introduced into this House and here goes through the process of Committee and Report, we often find that it is passed in a much more acceptable form and with far less consumption of parliamentary time when it reaches the other place. Again, this is an example of what I am seeking to say, which is that the problem is not a technical one so much as a constitutional one and that we should remember that much of what we are complaining of is actually due to the balances and checks which we have come to accept as part of our constitutional liberty. I think we should be willing to recognise the truth with which my noble and learned friend Lord Scarman began, in saying that statute law, whether you like it or not, is the fabric upon which the modern state is founded.
Having accepted that, I still have to admit what was delicately hinted at by more speakers than one—and I know that my noble friend Lord Renton and my noble and learned friend Lord Simon of Glaisdale put the matter in rather guarded language—and that is the machismo of Ministers and ministerial departments. Here I must be very cautious remembering where I stand and the duties of party loyalty which surround me on every side. But I have noticed—and I am bound to say that I have noticed—that under both Labour Governments and Conservative Governments there are individual departments and individual Ministers who seem to take a pride in the quantity of legislation they introduce. It enables them to exert their "clout" as among their colleagues, it enables them to leave a legacy on the statute book, and it may even lead to hopes of promotion to another department where they may be less trouble. These are not technical problems; these are the realities of the political life we live.
I would only end by saying that I am not, I hope, as complacent as I may have contrived to sound. It is a remarkable fact that in 1911, which was in the heyday of one of the most remarkable groups of Cabinet Ministers which ever governed this country—and they happened to be Liberals; and one thinks of the galaxy of talent they then commanded: Lloyd George. Winston and Grey and dozens of others—they passed 450 pages of general public legislation. Compare that

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with the figures which we are now discussing, which are that per Session 3,000-odd pages of general legislation are produced, and between 10,000 and 13,000 pages of necessary statutory instruments. Then I think we have got to recognise that if I have not proposed a remedy, and if I have made a plea in mitigation, at least my noble friend Lord Renton has got a problem to place before Parliament and he is to be congratulated on having done so.
Lord Renton: My Lords, my noble and learned friend the Lord Chancellor, from the great depth of his experience, has regaled and entertained us, especially when he was speaking in his capacity as devil's advocate. I shall come back in a moment to one or two of the things that he said. But, before I go any further, I should like to thank every one of those noble and learned Lords and noble Lords who have spoken in this debate, whether they be laymen, Queen's Counsel, members of the Outer Bar or noble and learned Lords of such great experience as Lord Denning, Lord Scarman and others.
There is, strangely enough, a consensus. I think that I can best express it by presuming to summarise what my noble and learned friend the Lord Chancellor says. We take for granted that there has been a lot of legislation, and there will always be a lot of legislation. We depend upon it; it is the instrument of policy. We accept the fact that there are Ministers who will press for legislation and, rightly or wrongly—perhaps sometimes wrongly—pride themselves upon the fact of it. We accept the fact that our Parliament has its own strange habits with which in our free democracy we dare not tamper because we must give the Opposition and Private Members on both sides of both Houses the opportunity of commenting.
On all those aspects we can agree; but we can also agree from, in fact, every speech made in this debate that the quality of legislation could be improved even given the matrix, the parliamentary procedure, without altering it, if only there were a little more trust on the part of all of us in the concept of more simple language being used. To those who say, "We shall merely be surrendering our power to the judges", I say this: let them make their choice of evils, if they think that it is an evil. The judges—goodness knows!—are troubled more than enough, more than they should be, by the complexity of legislation which our habits produce. Might it not be that they would be troubled a little less if shorter, plainer language with statements of principle and purpose clauses were used?
Several noble and learned Lords have been kind enough to say that I have tried to do something about all this. I shall go on trying and I shall go on trying with the encouragement which this debate has given. I beg leave to withdraw my Motion for even short Papers.
Motion for Papers, by leave, withdrawn.

Williams and Glyn's Bank v. Boland: Law Commission Report
5.43 p.m.
Lord Simon of Glaisdale Lord Simon of Glaisdale rose to call attention to the Law Commission Report on The Implications of
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Williams and Glyn's Bank v. Boland (Law Com. No. 115; Cmnd. 8636); and to move for Papers.
The noble and learned Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. Its rather obscure terms cover a question of very wide and deep importance. That is because of the dual nature of the matrimonial home. On the one hand, it is the seat of a family and, as such, its integrity is of great social importance. On the other hand, it is a capital asset which should be capable on requirement of being dealt with commercially with speed, economy and safety. The problem facing the Law Commission in the reference to them was to reconcile those two aspects. Provided that their report is read as a whole, taken as a whole and not taken selectively, they did, in my submission to your Lordships, succeed quite brilliantly. We owe them a debt of gratitude, not only for their clarity and perspicuity but also for their conclusions.
There were two cases which were reported at the same time, and the facts in outline in Boland are as follows. The husband. Michael Boland, bought a house. It was not the first family house. He went to live in the house with his wife and, I think, their child. The wife made a substantial contribution towards the purchase of the house. That was a common feature of both cases. The husband in order to finance a business venture raised a loan from the bank on the security of the house. The house was in his sole name although the wife did not know that—indeed she had no reason to know that because previous houses had been in their joint names.
The husband failed to repay the loan on time and the bank attempted to realise on the security of the house which had been pledged to meet it. It was not disputed that, as between the husband and the wife, the wife was entitled to remain; but the bank claimed that, as between them, an innocent mortgagee, albeit one who had made no inquiries as to whether there was a family living there, the bank was entitled to turn the wife and the child out and to have vacant possession. A unanimous Court of Appeal, which was presided over by my noble and learned friend Lord Denning, rejected that claim of the bank, and that judgment was upheld, again unanimously, by an Appellate Committee of your Lordships' House.
The situation obviously raised difficulties for conveyancers, banks and other persons lending on the security of a matrimonial home. My noble and learned friend who sits on the Woolsack therefore referred the matter to the Law Commission. At the same time, he asked me to withdraw a Bill to which your Lordships had given a Second Reading, the Matrimonial Homes (Co-ownership) Bill, which obviously falls very much within this sphere of the law. so that the matter could be considered along with the issues that were raised in Boland.
The decisions turned partly on highly technical aspects of the law of conveyancing and land registration. I am not going into them because, in the first place, I know my own limitations. Secondly, if they have to be gone into, your Lordships will be looking to my noble and learned friend the Lord Chancellor; and, thirdly, your Lordships are going to be privileged to hear the maiden speech of my noble and learned friend Lord Templeman, who is an

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acknowledeged master of this branch of the law. Although many of the issues were highly technical, running through the judgments was a strong sense of the social issues that were involved.
I have mentioned the co-ownership Bill. Perhaps I may give a short background to that. It starts in 1965. when my noble and learned friend Lord Gardiner in his notable act of statesmanship set up the Law Commissions. One of the very first problems that they took up was matrimonial property. That was because development of the law did not match the modern concept of a marriage as being an equal partnership between husband and wife in which each of them performs complementary functions.
The task was to modernise the law and attune it more to modern conditions. The Law Commissions had wide consultations and they put out a discussion paper and also commissioned a social survey. Those three steps showed an overwhelming acceptance of the desirability of co-ownership of the matrimonial home and a majority (although a narrow one) of people who actually practised it.
On the strength of that survey, the Law Commissions produced a number of reports setting the legal framework for the modern approach to matrimonial property law. Your Lordships debated the third report as long ago as July 1979, when it met with very general approbation. I remember that the noble Lord, Lord Mishcon, was the spokesman on that occasion from the Bench on my right. That third report had three drafted Bills annexed to it. One has subsequently been enacted and another was the co-ownership Bill which, as I have said, I withdrew after the Second Reading.
That Second Reading was in February 1980, and the noble Lord, Lord Boston of Faversham, was then speaking from the place where the noble Lord, Lord Mishcon, now is. He had only one reservation—a very small Committee point—on which I personally agreed with him: it was obviously a matter for discussion. Otherwise, the noble Lord was strongly enthusiastic in favour of the measure. There was also the noble Lord, Lord Middleton, who I ought to mention because he cannot be here today. He was apprehensive about the impact of the measure on historic homes. I personally saw great force in his objection and subsequently I agreed, with the approval of the Law Commission, an amendment which was acceptable to the Law Commission and which would meet his point. I told the noble Lord that I was going to mention this to your Lordships and the noble Lord very much regrets that he cannot be here.
Apart from that, there was virtually not a murmur of criticism of the Bill until we came to my noble and learned friend on the Woolsack. All your Lordships who spoke at that time having expressed such very strong approval, my noble and learned friend naturally felt it his duty to constitute himself, as he expressed it, devil's advocate. As always, he was forceful and eloquenti and indeed the only criticism that could be raised was that his speech had nothing whatever to do with the Bill. His objection was that there was widespread dissatisfaction among husbands who had been divorced and their second wives about the property dispositions made after the divorce; but of course the Bill dealt with rights of ownership and finance before there was any divorce, during marriage.
So the case for the Bill went virtually without contradiction.
I have said that I withdrew the Bill; but after doing so I was advised, and accepted the advice, that the Bill was in any case beyond the capacity of a private Member. Certainly it was a considerably more weighty measure than the ones I had undertaken to promote in your Lordships' House at the request of my noble and learned friend the Lord Chancellor. This Bill ought to be—and this is one of the points I desire to submit to your Lordships—a Government Bill, partly because of its weight and importance, and partly because it emanates from the Law Commission on a reference to the Commission by the Government.
The Law Commission have reported, and they find that the disadvantages from Boland outweigh the advantages of promoting, or further promoting, the integrity of family life. The disadvantages are the additional risk, complication and cost of conveyancing; and they find those to be unacceptable. However, they say that the advantage in the way of maintaining the family integrity of the matrimonial home should be vindicated by enacting the Matrimonial Homes (Co-ownership) Bill. They say, repeating what their predecessors of different constitution said, that that Bill is justified on its own merits, but that it is further commended and endorsed by the other conveyancing recommendations.
Therefore the questions I would venture to ask are these. First, do the Government accept the Law Commission's recommendations in totality? Secondly, do the Government accept that the technical recommendations cannot be implemented in a manner consonant with social justice to wives without the scheme of co-ownership? Thirdly, will the Government themselves assume legislative responsibility over the whole field? My Lords. I beg to move for Papers.
5.58 p.m.
Lord Mishcon: My Lords, your Lordships have heard very erudite and eloquent references to some of the problems involved in and created by the decision in Williams and Glyn 's Bank v. Boland from the noble and learned Lord, Lord Simon of Glaisdale, to whom we are so much indebted for bringing these matters to our attention. Like the noble and learned Lord, Lord Simon, I am sure that the whole House will have seen with considerable pleasure that the noble and learned Lord, Lord Templeman, is to make his maiden speech in this debate and, with your Lordships, I look forward very much to hearing him.
Having had a different view from his own view expressed as a judge of first instance by the Court of Appeal and the House of Lords in this very case, I have a sneaking suspicion that he is experiencing tonight some secret sense of amusement that if his judgment had been followed by the highest court of appeal, which he now graces with such distinction, the noble and learned Lord who sits upon the Woolsack would have been saved at least part of the severe legal headache your Lordships are asked to share with him tonight.
As the noble and learned Lord, Lord Simon of

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Glaisdale, has indicated, that legal headache has its origin, to put it shortly, in the decision that, in regard to registered land of which Mr. Boland was the sole registered proprietor, and by virtue of Section 70(1) of the Land Registration Act, his wife's interest, through her contribution towards the purchase of the family home, was—and I quote from the Law Commission's Report—
"an interest subsisting in reference to the land".
As she was in actual occupation at the relevant time, and as the bank in whose favour the property was charged had made no inquiries of her, her rights consisting of her property interest and the dependent right of occupation were an overriding interest, to which the charge given by Mr. Boland, her husband, to the bank was subject—no registration, no notice.
By that decision—and I am again paraphrasing the report—two general and important features of our law were held to be excluded; that is, the doctrine of notice and the system of over-reaching. As the report also states, it looks as though, for slightly different reasons and in spite of a different procedure, the result would have been just the same if the land had been unregistered. A spouse has, of course, a separate statutory right of occupation protected under the Matrimonial Homes Act 1967. While always binding on a spouse who is the legal owner, a purchaser or mortgagee, however, is bound only if the spouse's right has been registered.
Quite separately from the problems created by Boland—and, indeed, before the decision in Boland, as your Lordships have heard—the Law Commission reported in 1978 on family property. It was their third report, and in it they recommended—and, indeed, set out as an appendix to Book 1 of that report—a Bill which, broadly but with some exceptions, provides that where either husband or wife, or both, own the matrimonial home, it is to be owned equally by way of a trust for sale under which they will have a joint beneficial interest. This is called statutory co-ownership. Your Lordships have heard much about this Bill from the noble and learned mover of this short debate.
As has been said, the Boland case has caused very grave conveyancing difficulties and hardships, quite apart and distinct from questions of matrimonial relationships. To use the Law Commission's own words in paragraph 44 of their report:
"We maintain that, despite its advantages, the protection given by the law as it was found to be in Boland is inadequate for co-owners, detrimental to purchasers and inconsistent with the general policy of the law.".
There are equitable co-owners who are not wives or husbands and who come within this judgment, and the main difficulties are those created for perfectly innocent purchasers and mortgagees, who act with complete good faith but who, without any notice being registered, can find themselves faced with rights of occupation and so on which prevent them from obtaining possession of, or selling, a dwellinghouse in a manner which would have been completely open to them but for Boland. It is a serious matter, because all this can have a deterrent effect on the grant of mortgages when mortgages are badly needed and,
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possibly, when they are, from a social point of view, most needed.
The smaller the value of the dwellinghouse and the less the means of the borrower, the more likely it is that the mortgage will be refused if there are possible problems in the mortgagee's being able to exercise his rights in the event of default. This could so often be the position in which a young married couple find themselves. One must also not forget the equally distressing case, which can occur, however rarely, of purchasers—again, very likely a married couple—who have purchased a home and who then find themselves unable to obtain possession although their purchase has been completed.
The report, if I may say so most respectfully, made very sound recommendations for what should be fairly simple legislation; and in using that adjective I bear in mind the debate which immediately preceded this one. Balancing, as the report says, the sometimes conflicting interests of wives and other co-owners, on the one hand, and purchasers and lenders, on the other hand, the report advocates protection by means of the existing system of registration.
There should, the Law Commission say, be a registration requirement, whereby an equitable co-ownership interest, including the rights which flow from it, would be enforceable against a purchaser or lender if, but only if, the interest is registered in the appropriate manner. For the further protection of the matrimonial home, it is suggested that the rights of married co-owners should include a special consent requirement, whereby no sale or other disposition of the home can be effected without the consent of the other, or an order of the court.
The report also refers—and it is upon this aspect that the noble and learned Lord, Lord Simon of Glaisdale, has concentrated—to a scheme of equal ownership of the matrimonial home, in accordance with the Bill annexed to the Commission's third report, which I have already mentioned. While this Bill may well have attractions—as the noble and learned Lord, Lord Simon, said, I well remember speaking on that measure in this House; and I freely admit that it would be impossible to conceive of a more persuasive and persistent advocate of that Bill than the noble and learned Lord, Lord Simon—one must fairly say that it is a controversial Bill and a lengthy and complex Bill, and if linked, inevitably, to the other recommendations so that it is made to form an integral part of them, it would. I fear, either lead to no legislation at all or, at least, to much delayed legislation; and this, as I understand it, neither bona fide lenders nor the legal profession want. The legislative reforms required after Boland are much too urgent.
What I do not want to see—nor do I believe would your Lordships want to see in default of this legislative reform—are banks and building societies being forced, for their own protection, to conduct the most undignified, intrusive and even offensive inquisitions into the occupancy of a home, and the relationship between spouses and other joint occupants of a home, which will have to be the case if Parliament does not deal speedily with the implications of Boland in the still quite common case of the sole legal owner. I hope

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there will be speedy legislation; but, with great respect to the noble and learned Lord, Lord Simon of Glaisdale, I would say: let the provisions of the Bill dealing with spouses and statutory co-ownership be looked at and debated, by all means, but not to the detriment of what, to me, is the more essential and urgent legislation at this moment.
Husbands and wives are more and more, and for several reasons, becoming joint legal owners of their matrimonial homes. Where this happens there are few, if any, difficulties. Let this be encouraged and publicised. It is certainly very frequently advised by members of my own profession.
I repeat my expression of gratitude to the noble and learned Lord, Lord Simon of Glaisdale, for making it possible for us to put our points of view on this important case. I thank him in particular for permitting me to put my own views very respectfully to your Lordships' House.
6.10 p.m.
Lord Hooson: My Lords, I intend to make a very short contribution to this debate. I do not wish to stand between the House and the maiden speech of the noble and learned Lord, Lord Templeman, who must surely be making a maiden speech in an unprecedented situation. One is intrigued to know what his views are after years of reflection and contemplation, bearing in mind that he was the learned judge at first instance in the Boland case. My speech will be slightly longer than it would otherwise have been because of the remarks of the noble Lord, Lord Mishcon. The noble Lord seemed to me to be inviting the House to do exactly what the noble and learned Lord, Lord Simon of Glaisdale, suggested should not be done: to indulge in a process of selectivity with regard to the recommendations made by the Law Commission.
Speaking on behalf of my own party and the Social Democratic Party, it seems to me that it would be entirely unacceptable to us, and I believe unacceptable to this House, to embark upon the process which the noble Lord, Lord Mishcon, suggested. Surely it was because of the conveyancing problems which arose from the implications of the decision in Boland that it was necessary to refer the matter to the Law Commission. But the matter should not be referred to the Law Commission with a view to reversing the Boland decision. To quote the words of the noble and learned Lord, Lord Wilberforce, from the report of the Law Commission:
"As Lord Denning…points out, to describe the interests of spouses in a house jointly bought to be lived in as a matrimonial home as merely an interest in proceeds of sale, or rents and profits until sale, is just a little unreal".
That was absolutely at the core of the decision. The noble and learned Lords knew exactly the problems that they must have been creating for conveyancers. This matter had therefore to be referred to the Law Commission.
I had not read the Law Commission's Report until last weekend. I am very grateful to the noble and learned Lord, Lord Simon of Glaisdale, for causing me to read this fascinating report. What impressed me—I am speaking about a sphere of law which is outside my usual sphere—was how the Law Commission had
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looked at the problem as a whole. They had looked at the problem as it affected partners in a marriage who had jointly contributed to the purchase of the matrimonial home. One had the matrimonial home co-ownership interest. One also had the conveyancing or property interest involved. Then it was a question of the Law Commission, in a very impressive report, balancing everything out. The noble Lord, Lord Mishcon, has, as I understand him, suggested that we should accept part of the recommendations and not bother with the conclusions. The Law Commission came to three conclusions and made four recommendations. The noble Lord is virtually suggesting that one of the recommendations should be modified or limited, at least in its implications.
Lord Mishcon: My Lords, I am sure the noble Lord will not mind if I intervene to say that my point was that I thought it to be necessary to do something because of the conveyancing and other difficulties arising out of Boland. I was not expressing a contrary view with regard to the recommendation. I was saying that it was better to try to get a law through than to know that you could not get it.
Lord Hooson: My Lords, if I follow the noble Lord correctly, I think he would find greater difficulty in getting that law through than in putting through the package deal which the Law Commission has recommended. I do not think we should go beyond the package deal. We on these Benches would certainly give wholehearted support to the package deal, but not to a selective deal of the kind indicated by the noble Lord.
6.15 p.m.
Lord Templeman: My Lords, this debate involves consideration of two problems: the problem of protecting wives and the problem of protecting lenders. I venture to participate with some trepidation, notwithstanding the welcoming noises which have been made by those who have already spoken. For 35 years I have been substantially concerned with the problems of wives and lenders, although fortunately the problems have been of a professional rather than a personal character.
Until fairly recently, no problem arose about protecting wives, because wives had no rights. The ecclesiastical principle of the unity of husband and wife was perverted so that the husband was everything and the wife was nothing. The wife could not acquire property; she could not contract; her only consolation was that if she committed a tort her husband would have the pleasure of paying the damages. It was only slowly that that position was altered: first, I am glad to say, by the intervention of equity lawyers and the invention of such strange instruments as the restraints on anticipation. But that was only in favour of rich wives. As late as 1856 a working wife was not entitled to keep what she earned. One of the first worthy pressure groups on behalf of wives lamented the fact that a wife could work from morning until night, only to see the product of her labours wrested from her and wasted in a gin palace by her husband.
It was not until 1882 that the Married Women's Property Act gave a wife separate property and

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separate rights—although in theory rather than in practice. It may merely have changed her status from that of a slave to that of an unpaid housekeeper. Women's rights were not really asserted in the property sphere until after the Second World War. They were then raised for three reasons: first, the very proper assertion of independence and campaigns for non-discrimination on behalf of wives and women in general; secondly, the increase in divorce which brought into being large questions relating to the devolution and distribution of property; and, thirdly, the increase in value and the increase in importance of a matrimonial home, which may now be worth many thousands of pounds but yet cannot be divided into two.
The first step to cope with those problems is attributable to the noble and learned Lord, Lord Denning, who, by his usual skilful use of precedent, established the deserted wives' equity. That had certain difficulties upon which I need not dwell, but it spurred Parliament into passing the Matrimonial Homes Act 1967 whereby every spouse—the Act covers a husband as well as a wife—has a right of occupation of the matrimonial home, a right which can be disturbed only by an order of the court. The only difficulty about the Act is that for the rights to be enforceable against a purchaser or a lender, they must be registered under the Land Charges Act and the Land Registration Act. In practical terms, although the Law Commission say that some 70,000 women have registered under that Act it is not very practical to foresee a wife, the minute she has been carried over the doorstep of the house, going round to the Land Registry to register her rights in case she should become deserted and should wish to exercise those rights. That is a theoretical rather than a practical protection.
The next legislative step is now embodied in the Matrimonial Causes Act 1973 which enables the court to award to either party periodical payments or lump sums and to make property adjustment orders whereby a matrimonial home can be—some would s, ay brutally—taken away from a husband and given to a wife, or vice versa. My noble and learned friend the Lord Chancellor has been subjected to what he has called some expressions of dissatisfaction about that Act. It must be remembered that it only comes into play at the end of a chain, when the husband and wife fail to make sensible arrangements; when ministers and friends, conciliation officers and lawyers all have failed and someone has to make a decision.
It is only in those circumstances that the matter comes before the court; and it is inevitable in those circumstances that at the end of every case, the husband thinks that the wife has been awarded too much and the wife is convinced that she has been awarded too little. Nor can the matter be covered by mathematical divisions. Where there are different circumstances—a wife who is capable of earning an income of her own on the one hand, or a wife who has to bring up a disabled child on the other hand—it is not possible to lay down any strict rules as to how property ought to be divided under that Act. It is the Matrimonial Causes Act 1973 which puts husbands and wives on an equal footing, to be treated according
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to their needs and according to their assets when divorce takes place.
There remains, as there always remains, a serious problem: what is to be done about a husband who is tempted or has good reason to squander some of the matrimonial property before any question of divorce comes up, as in the present case with which we are concerned? What is to happen when a husband tiptoes round to the bank and borrows £10,000 on property which is in his sole name but in which his wife has a high moral interest—namely, the matrimonial home? The decision of your Lordships' House in the case of Williams and Glyn's Bank v. Boland is a partial and welcome solution to that problem—but only in part. That decision applies only where a wife can show that she has contributed to the purchase price of the house; that she has contributed some money to the husband, and that, although the property stands in his name, she has provided some of the capital with which it was bought. The decision in Boland does not protect the wife who has not actually contributed pounds and pence but has. in common parlance, contributed "the best years of her life". She has no protection under Boland if the husband then goes and mortgages the matrimonial home which she leaves.
The other problem that arises from Boland is the problem of lenders. It arises in this way. Until the Boland case, in the interests of borrowers and lenders—and in the interests of flexibility, cheapness and efficiency—statutory efforts were made to cut down the amount of mumbo-jumbo which is necessary when a house is mortgaged or sold. The idea was that if a man owned a house or any other piece of real estate he could go to his bank manager and say, "Here is a valuation of my house which shows that it is worth £40,000. I need £10,000 for my business". If the bank manager asks, "How do I know that you own the house, and how do I know that you have not mortgaged it already, and how do I know that there are not lots of other people who have rights in connection with the house?" the man would simply and triumphantly produce a Land Registry certificate. He would say, "This has the red seal of the Land Registry upon it. It is of today's date. You will see that I am the sole owner and that nobody else has any rights". That being done, the bank manager could put his hand in his till and produce the £10.000 in the knowledge that he will get a good title to the mortgage of the house as security and that no one else could intervene.
As a result of the Boland case, the bank manager can no longer say that. As a result of the Boland case, although an interest in the house has not been registered, the interest of someone in the house who is in actual occupation is effective, and it is binding on the bank manager. The problem is one which applies not only to wives but to everyone in occupation. In theory, the bank manager must go along to the house on the day when the mortgage is to be registered, knock on the door and find out who is there. He must ask of each and every occupant, "Have you any claim to or interest in the house?" There may be a boy friend, who has contributed £ 1,000 to the purchase of the house, or there may be a father-in-law who has contributed £5,000 to the purchase of the house. There could be any number of persons who may be able to say, "We have an interest in the house. We

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have not registered that interest but we are in actual occupation and therefore you have notice". Therefore, the bank manager cannot lend until those inquiries have been made.
The Law Commission has come up with a solution which extends the protection of wives and extends the protection of lenders. The protection of wives is extended because, as regards all wives, and all husbands for that matter, whether or not they have contributed in cash to the house, the matrimonial home is to be held, under the Bill which they recommend, in joint ownership for the husband and wife in equal shares. Upon divorce the court, under the Matrimonial Causes Act, may make an alteration to those proportions if it were proper to give the wife more or less—but to begin with, the marriage starts off with the matrimonial home being owned jointly and equally by husband and wife. I venture to suggest to your Lordships that that is a normal and sensible precaution, which most people take voluntarily. This Bill, if it is effected, will only bring everyone into that ken so that husband and wife will share the house equally between them.
As regards the protection of the lenders, the Law Commission has recommended that no right shall be assertable against a bank or lender unless it is registered. Although we have been invited to take the report, the whole report and nothing but the report, I venture to wonder whether its recommendations in that respect are right so far as wives are concerned. I have already indicated, under the Matrimonial Homes Act, that it is asking a lot of a wife to go and register what appears to be a hostile notice in the Land Registry against her loving husband. Therefore, so far as wives are concerned, I see no reason why the Boland decision which protects her should not stand; so that if a wife has an interest in the matrimonial home, whether she has registered it or not, the husband should not be able to mortgage or sell it without her consent. That involves the bank manager in making only two inquiries. First he has to ask, "Are you married?" Secondly, if the answer to that question is, "Yes", he has to say, "I cannot lend you any money unless your wife signs the mortgage deed and agrees". I see no reason why a husband should lament that. It is something he ought to do anyway. There is the faint possibility that some husbands will be so fraudulent that they will pretend they are bachelors, or are living on their own when they are not, but that is not really a practicable difficulty; it is extremely hard to disguise the fact that one is living with someone in a matrimonial home. Most of these matters will be dealt with through solicitors, who will make inquiries of their own clients.
It will be limited to the wife. She alone will have an interest which is enforceable against a bank whether she registers it or not. As regards all other persons—boy friends, girl friends, business associates, or fathers-in-law—who produce substantial sums of money as a contribution to the purchase of the house, why should they not register? They ought to know that, if one hands over large sums of money towards the purchase of a property, somewhere or other there should be a deed or registration which enshrines their rights. All this does is to cast on them the sensible onus of saying. "If I am to put up £5,000 towards my son-in-law's
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house. I must first go to a solicitor to have him draw up a deed to say that I have done this". Once he goes to the solicitor, the solicitor will register.
I commend the report of the Law Commission to your Lordships as being an improvement to the status of the position and protection of wives and of husbands where material; and as being a report which eases the burden of the difficulties of lenders. No one has great sympathy for lenders or banks but the point is that at the end of the day it is the borrower who pays, unless there is some speedy and efficient method of conveyancing. This is not a question of letting the banks bear the burden of husbands who mortgage their houses; it is a question of getting a speedy and efficient system of conveyancing. Subject only to this, I, for one, would tentatively suggest to your Lordships that we ought to give the wife the fullest possible protection and not cast on her the possibility of losing her house because she has not been brave enough or thoughtful enough to go along and register her interest in the Land Registry.
6.30 p.m.
Lord Scarman: My Lords, I know the House would wish me at once to offer the most warm and sincere congratulations to my noble and learned friend Lord Templeman, on his elegant, lucid and persuasive maiden speech. I have known my noble and learned friend for many years, and it came as no surprise to me to hear a speech delivered in such an incisive and penetrating style and with that lovely salting of wit which I am sure will mark the contributions which all of us hope he will make to the deliberations of your Lordships' House in the future.
I of course suspected that my noble and learned friend would, with his knowledge of the subject, make it unnecessary for me to deal with what I would describe as the somewhat disturbing speech of the noble Lord, Lord Mishcon. The noble Lord was a little selective in his choice of quotations from the report of the Law Commission. True enough, in paragraph 44 the Law Commission said that the protection given by the law to the wife as found in Boland is inadequate. But he was able to quote that by beginning in the middle of the sentence. In the same sentence the Law Commission had said:
"We maintain that, despite its advantages, the protection given by…Boland …"
et cetera.
The advantage of the Boland decision, as my noble and learned friend has pointed out, was that it achieved in a difficult field a measure of social justice and protection for the wife in her occupation of and property interest in the matrimonial home. This was an important achievement. Unfortunately, it did it at the cost of causing risk, expense, and perhaps in some circumstances a measure of embarrassment, to lenders and purchasers, and it was because of the need to achieve a balance between justice to the wife and justice to the purchaser and lender that the noble and learned Lord the Lord Chancellor referred the Boland question to the Law Commission.
My Lords, I agree with the noble Lord, Lord Hooson, that this report of the Law Commission is a

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splendid contribution towards the understanding of the law and the way in which the law can be reformed. There are, of course, criticisms which one can make here and there of certain passages in the report. Your Lordships may think there is some justice in what my noble and learned friend Lord Templeman said about the wife faced with the need to register. She will see this as a hostile act, unless of course it becomes more common than I regret to say it is for people on marriage, or immediately after marriage, to consult lawyers.
My Lords, there is a principle here which I have had the pleasure and satisfaction of hearing enunciated frequently in this House by the noble and learned Lord the Lord Chancellor. When Parliament is faced with a Law Commission report there is a strong presumption that that report is soundly reasoned and that its recommendations will be rejected only after very full consideration, if at all. I would say to this House—it is important that I should say it after the contribution to this debate of the noble Lord, Lord Mischcon—that the recommendations contained in the Law Commis-ions's report on this particular reference are to be taken, so the Law Commission advises, as a coherent whole. They were prepared to recommend the measures for the protection of the lender and the purchaser—namely, registration of the wife's interest and the consent requirement, that is to say, giving her the right to intervene to stop a transaction going through—only upon the basis that they should be implemented together with their previously recommended Matrimonial Homes (Co-ownership) Bill. They did that because they recognised that the two measures which they proposed for the protection of the lender and the purchaser to some degree diminished the protection that the judges had been able to give to the wife in the Boland litigation.
So. quoting a word from the noble Lord, Lord Hooson, it was a highly intelligent package deal. The Law Commission were not recommending these protections for the bank, the lender or the purchaser unless they were accompanied by a balancing advantage, which of course Boland could not give, for the wife. Therefore if, as I sincerely hope, consideration will be given to implementing the recommendations of the Law Commission on the Boland reference, let it not be forgotten that the Law Commission's recommendation is "Yes, this protection for the lender and the purchaser, provided you also give to the wife the protection of the Matrimonial Homes (Co-ownership) Bill."
Of course, there has been some controversy about the Matrimonial Homes (Co-ownership) Bill. I am certainly not going to enter into it tonight. I am saying to the House tonight that at the moment this is a Bill which has been researched and thought out by the Law Commission. It has been looked at both before and after the Boland decision, and it is part and parcel of their recommendations for the protection of wives and lenders after Boland. But I seem to remember that in debates in this House on the co-ownership Bill the view was put forward, I think by the noble and learned Lord the Lord Chancellor among others, that there is really no need for investing the wife with a statutory co-ownership in the matrimonial home.
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The reason why that is put forward is that it is becoming, as I am glad to think it is becoming, more and more prevalent among young married couples to put the home, when they acquire it. in their joint names. That is first-class, and it should be encouraged. Indeed, I think we should encourage young married people to go round the corner to the solicitor, or, if we could establish one, the legal clinic, to talk about the legal problems of marriage, just as they go to the medical clinic to discuss the medical problems associated with what is euphemistically called family planning. Both the legal and the medical clinics have a part to play. But they do not do that, or not all of them, or not enough of them.
When one is looking after a wife in this sort of context one has to look after the unwary woman; the woman who is at a period in her life when such vision as she may have of legal problems is entirely clouded, perhaps mercifully, by passion and love. This is the woman, at perhaps her most weak moment in the whole of her life, who has to be protected. It is surely worthwhile accepting a certain measure of difficulty—there may be some difficulties in the Matrimonial Homes (Co-ownership) Bill—in order to achieve that protection, bearing in mind that, on the Law Commission's recommendation, substantial protection is to be made available to third parties dealing with the husband over the matrimonial home.
I hope that the questions put by my noble and learned friend Lord Simon of Glaisdale at the end of his eloquent introduction to this debate will be most seriously considered by the Goverment.
Lord Mishcon: My Lords, before the noble and learned Lord sits down, will he permit me to intervene? I have the whole of that passage noted very clearly for quotation. If I omitted the words to which he referred. I know that he will accept it from me that it was completely by mistake. But I think if he reads the Official Report tomorrow he may find, most unusually, that it was he who made the mistake, not I, and that the words are included in my quotation.
Lord Scarman: I am absolutely delighted to hear that and I certainly hope that that is the position. If the noble Lord spoke the words and I failed to hear them, that is a matter for apology. It is perhaps also an indication that as one gets older, one's hearing is not quite so good, particularly when the speaker is looking towards the Woolsack and not towards the Cross Benches.
There is one further point which arises from that. It is the point regarding the coherent home in paragraph 116 of the Law Reform Report, which is so important.
6.41 p.m.
Lord McGregor of Durris: My Lords, your Lordships' House is indebted to the noble and learned Lord, Lord Simon of Glaisdale, for this opportunity once again to debate family property in the context of the Law Commission's report on the implications of the case of Williams and Glyn 's Bank v. Boland and for his erudite and lucid exposition of a complex subject. A layman would indeed be brash and foolhardy to venture upon the legal ground occupied

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by the noble and learned Lords who have already spoken and who are yet to speak. This is more especially the case after your Lordships have enjoyed the powerful, masterly and witty maiden speech of the noble and learned Lord, Lord Templeman. But a lay contribution ought to me be made to this debate, although I do not relish the loneliness of the task.
The law regulating property relationships between spouses and between them and others with whom they may deal, and with whom they ought to deal honourably, is not an end in itself. It is an instrument to secure and safeguard the values which society upholds in the institution of marriage and the family. One such value is equality between husband and wife. What the lay public, men and women alike, think about that is very well known, and known with certainty, because in 1971 the Law Commission commissioned a national random sample survey, to which the noble and learned Lord, Lord Simon of Glaisdale, referred, among married couples in England and Wales in order to discover their opinions about matrimonial property and the patterns of ownership of such property. Stripped of all statistical detail, the survey showed that most married couples regard equality as the proper norm of the law regulating their property relationships.
This survey was the first occasion when fairly large scale social research was directly designed by a law reform body in England for the purposes of assisting a reform of the law. Unhappily, it has also been the last so far. Nevertheless, it remains to the great credit of the Law Commission that it was the first to use properly designed social research to discover the views and wishes of the citizens whose family lives would fall to be regulated by any new law on family property.
It is therefore essential to distinguish between matters of legal technique and the purposes which the law seeks to uphold.
"The opinion of members of the public"—
said the Law Commission—
"is of great importance".
It summed up what women were saying, with considerable male support, in this statement:
"We are no longer content with a system whereby a wife's rights in family assets depend on the whim of her husband or on the discretion of a judge. We demand definite property rights, not possible discretionary benefits".
In accordance with the brilliant innovation of the noble and learned Lord, Lord Scarman, when he was chairman of the Law Commission, the working paper on family property law containing, inter alia, a proposal for the introduction of a fixed principle of equal co-ownership of the matrimonial home, from which I have just quoted, was put out for the widest possible circulation and comment. In its 1973 report, the Law Commission referred to an exceptionally wide consultation, to a very great response, and to widespread interest from members of the public, many of whom sent us their views on the general issues. The Commission concluded:
"The great interest shown in the working party reflects the importance attached to family property by lawyers and laymen alike. Any change in the property rights of husband and wife would affect many married couples and it is appropriate that so many should have taken the opportunity to express their views".
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Following the introduction in 1969 of irretrievable breakdown of marriage as a ground for divorce there was a general debate on the reform of financial provision and of family property. Many lay people thought that such reform must follow the new divorce law, especially upon the capacity of a spouse to divorce a wife or husband against their will. At that time, in its working paper, the Law Commission spoke realistically of property rights and support rights as in fact complementary, and it pointed to
"the close relationship between support rights and property rights".
Well, support rights are again under debate, and the legislation of the early 1970s is a candidate for amendment. But we still seem to be stuck in a groove where family property law—I again quote the Law Commission—
"is hardly more than a label given to the hesitant moves by Parliament during the last 100 years to eliminate the grosser injustices inflicted by the common law upon women in property matters".
The public wants change. This has been demonstrated over and over again during the last dozen or so years. But public expectations go on being falsified. Dicey observed in his account of the Married Women's Property Act 1882 that:
"Changes in the law which affect family life always offend the natural conservation of ordinary citizens".
It seems, on recent experience, that they have offended also the natural conservatism of Labour and Conservative Governments since the early 1970s.
What further evidence is required to support the desirability of legislation of the type advocated in the report of the Law Commission which we have been discussing? Most commentators agree that the law is unjust and uncertain and the Law Commission in its report on the implications of Williams and Glyn's Bank v. Boland again urges the introduction of a scheme of equal co-ownership of the matrimonial home.
When the noble and learned Lord, Lord Simon of Glaisdale, gave your Lordships the opportunity to debate this matter in 1979, the noble Lord, Lord Mishcon, said that he regarded the Law Commission's proposals as unduly complicated and he said that he would have preferred to have proceeded by a different legal technique. Nevertheless, he concluded at that time that, in order to secure justice, it is better to adopt a scheme quickly, even though it is complex.
There has not yet been anything quick in this business. The noble Lord, Lord Mishcon, said today that co-ownership is a controversial measure. But who are the controversialists and what is the controversy about? They assuredly are not married couples and they are not the people who have a very clear view of the moral values that they wish to sustain in their marriages. Doubtless there may be controversy about legal techniques, but the public overwhelmingly supports the Law Commission's objective and it would be hard to think of any other legal reform which has been discussed in recent years which has been so widely argued, so widely canvassed and so widely approved.
It is for lawyers to devise and to agree upon the appropriate legal technique which will safeguard the proper interests of third parties and at the same time enable wives and husbands to live under a régime of

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family property law which embodies and sustains the moral values which lie at the heart of their family lives.
6.54 p.m.
Lord Gardiner: My Lords, I rise to deal with two matters, and I shall be very brief. First, I am very glad to see the noble and learned Lord, Lord Templeman, and I should like to congratulate him upon his maiden speech. Noble Lords do not need me to tell them what advantage it will be to have the advice of the noble and learned Lord, Lord Templeman, in the future, because they have heard his maiden speech and appreciate that already. I hope very much that he will give us his advice whenever he is free from his judicial duties and is able to do so.
Secondly, I want shortly to support the plea which has been made by the noble and learned Lord, Lord Simon of Glaisdale. When it became obvious after the Boland case that there would have to be certain changes in this field of law, it was the noble and learned Lord the Lord Chancellor who asked for the advice of the Law Commission on what course ought to be taken. It is plain from their report that they have gone into this matter very thoroughly. They have consulted every kind of financial organisation—clearing banks, bankers, finance houses and commissions—as well as, of course, the British Legal Association, the Chancery Bar Association, the Family Law Bar Association, the Law Reform Commission of Ireland, the Law Society, the Senate of the Inns of Court and so forth. They have exhaustively discussed every possible alternative and the advantages and the disadvantages of each alternative. These they have set out in their report. What it comes to is that we ought to enact the Matrimonial Homes (Co-ownership) Bill with a number of important amendments which they specified.
They concluded 118 paragraphs of their report by saying, in effect, that they did not think it would be useful to draft the actual Bill until they had heard further from the noble and learned Lord the Lord Chancellor, and that one can understand. Therefore, I would very much hope that the Government will take the attitude expressed by the noble and learned Lord, Lord Scarman, that when there is a unanimous report of the Law Commission of this kind, when it is obvious that they have been through a very full stage of consultation with everybody with views on the subject and have come to a unanimous conclusion, prima facie that report should be accepted. I hope very much that the noble and learned Lord will say to them, "Now go ahead and draft the Bill". Of course I appreciate, as I am sure we all would, that whatever Bill is drafted it will always be open to any Member of either House to move an amendment to if, that, of course, is inevitable. But I would submit that prima facie the proper course for a Government to adopt is for to them take the Law Commission's report and to say to the Law Commission: "Yes, go ahead and draft the Bill".
6.57 p.m.
Lord Denning: My Lords, I should like to join with the rest of your Lordships in congratulating my noble and learned friend Lord Templeman on his maiden speech. It contained a view of our law between
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husband and wife which was wholly admirable, concise and informative. So far as I am concerned. I think that for the last 30 years I have been involved in practically every case in the courts concerning a matrimonial home. If I had anything to do with the question of which court tried a case I would try to see that it came before a court over which I was sitting. Perhaps I should not have done so. but anyway I have been involved in most of those cases.
There has been a remarkable development for the protection of the wife in regard to the matrimonial home. Previously, as my noble and learned friend has said, the wife had no rights. If the house was in her husband's name, he could turn her out just as if she was a licensee with no rights whatever. We remedied that by the deserted wife's equity. If she was deserted by her husband and he sought to turn her out. we said that no, he should not do so: even when the matrimo-, nial home was transferred by the husband to a bank, we would not let the bank turn her out. But the House of Lords said that the bank could do so. and it needed Lady Summerskill with the Matrimonial Homes Act 1967 to put that right. So now. by law and by statute, the deserted wife is protected in the matrimonial home. That is the first great step.
The next great step which has not been widely recognised is that, although the house was in the husband's name, the wife, by law and equity, was given a share in the house, at first, by her money contributions (if her earnings helped to pay the mortgage instalments); next, by her looking after the children; and, next, by her generally looking after the house. By a series of decisions, the wife has been given a share in the matrimonial home. That is what happened in Boland and is why there was trouble.
In Boland's case, the husband was running a company and wanted to borrow money for the company. He did, and the bank—which always wants not the company's credit but the husband's credit—said. "Will you guarantee it?" The husband said "Yes, I'll guarantee it personally." The bank then said. "What security do you have?" He has his house in his own name; he produces the deeds, and the bank lends the husband the money. Then the company goes bankrupt, it goes broke and goes into liquidation. The bank then comes down on the husband, who cannot pay. The bank asks. "Where is the house?" The house is in the husband's name. The bank then say that they will turn out the wife. That is what the bank claimed to do in Boland's case, the wife having known nothing whatever of what was going on.
It was in those circumstances in the Court of Appeal that I ventured to say:
"Anyone who lends money on security of a matrimonial home nowadays ought to realise that the wife may have a share in it. He ought to make sure that the wife agrees to it or go to the house and make inquiries of her. It seems to me utterly wrong that a lender should turn a blind eye to the wife's interest, or to the possibility of it—and afterwards seek to turn her and the family out—on the plea that they did not know she was in actual occupation. If a bank is to do its duty in the society in which we live, it should recognise the integrity of the matrimonial home. It should not be destroyed by disregarding the wife's interest in it—simply to ensure that the husband's debt is paid in full—with the high interest rates now prevailing. We should not give monied might priority over social justice. We should protect the wife who has a share in the home just as in the old days we protected a deserted wife."

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That is the principle which was affirmed by the House of Lords. It is the principle which ensures social justice in our time to the wife who is living in the matrimonial home and who knew nothing whatever of what the husband was doing with it. the bank not having made the slightest inquiry or having gone to the house to make any inquiries about the wife. They sought to get her out without a word to her. That is Boland's case, and I am most pleased today that my noble and learned friend Lord Templeman would not wish to shake the validity of Boland's case in regard to wives.
What, if it were taken alone, would this new Bill which is recommended by the Law Commission do? It would say, "Such a wife is not protected unless she has registered a charge." What wife who is living in the matrimonial home knows anything about registering a charge? If she is living there happily with her husband, does she go off to a solicitor and tell him to register a charge, she not knowing that her husband is borrowing money? We ridiculed that in the deserted wife's case. and I would ridicule it now. If that is not right, I would recommend every bride, as soon as she is married, to go to a solicitor and say. "Register my charge". I have said that that is what ought to be done in the case of deserted wives. But that is not really a practical proposition.
Therefore, I would be entirely against this recommendation if it stood alone. But it does not stand alone. That is the important point which my noble and learned friends Lord Simon of Glaisdale and Lord Templeman have made. It is really a necessary part of the initial proposals for statutory co-ownership—the very important proposals which were made in 1978 by the Law Commission. I would agree with my noble and learned friend Lord Gardiner that these most important proposals being made by the Law Commission should receive the most careful and serious consideration.
I am sorry to be a little hesitant, but, as I looked at that third report which, mark you, will insist that every married woman is, by statute, a co-owner with equal property with her husband——
Lord Simon of Glaisdale: My Lords, If my noble and learned friend will allow me to interrupt, it was only a prima facie régime; anybody could contract out. There was no force about it at all.
Lord Denning: My Lords, maybe, but at the moment I do not want to go into all the details of that proposal. To all events and purposes, the proposal was that there should be statutory co-ownership of husband and wife in equal shares, unless they had contracted out. Is that to happen within a week or a fortnight of entering the matrimonial home? It may have been the husband's house before. He marries a wife and brings her into it; is she automatically to have equal co-ownership? I only mention that one instance for this reason. In the third report the Law Commission recognised how complicated and difficult this whole subject was. They said:
"It cannot be doubted that the provisions which we propose for co-ownership are complicated and difficult, but we do feel the need to take account of the many different situations which may exist and to deal with them fairly, and it is this need which largely accounts for the intricacy of the statutory provisions".
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It is a complicated proposal, with intricate provisions, and I would wholly support my noble and learned friend Lord Simon of Glaisdale, in saying that it ought to be a Government Bill. They ought to take it up and press it through, if that be the right solution. It ought to be discussed in both Houses, because it is a most important subject. However, that is the right course. Then, in such a discussion, the proposal which is now raised in regard to Boland could be co-ordinated with it and made one comprehensive statute, which would be the most important in our time in regard to the matrimonial home.
Therefore, I hope that this latest Law Commission report will be considered, with the other, with a view to implementation by a comprehensive statute dealing with everything. I would entirely agree with my noble and learned friend Lord Templeman: let the wife be protected even though she has not registered. However, as to all these other possible co-owners who may have a share of one kind or another, they ought to register. The wife ought to be regarded as being in a special position. I would suggest that everything be dealt with in a comprehensive Bill to be introduced by the Government.
7.9 p.m.
The Lord Chancellor: My Lords, in some ways this has been a remarkable day. I think that we have heard no fewer than six speeches from noble and learned Lords on the Cross-Benches and, if you count the two ex-Lord Chancellors, eight from Law Lords. In opening may I say something which I forgot to say in our earlier debate. I saw the noble and learned Lord, Lord Gardiner, sitting patiently in his place during the first debate. He must, I think, have been very gratified at the repeated praise which was lavished upon his own achievement during his chancellorship of instituting the Law Commission, for which at the time I thought he had rather negative praise, though, if I may say so—and I was then in another place—I tried to redress the balance a little.
My next task is, obviously—and my first task, in a sense, in answer to this debate—to welcome the noble and learned Lord, Lord Templeman. and congratulate him on his maiden speech. There is. as I think the noble Lord, Lord Mishcon, pointed out, something droll about the fact that the judge of first instance should be making his maiden speech and the Master of the Rolls who reversed him should be saying, "How right I was". I am not sure how desirable it is, I must say to the noble and learned Lord, Lord Denning, for those who have pronounced in a judicial capacity to say "How right I was" in a legislative capacity. I think that that has dangers which are perhaps more apparent to me than they always are to him. At any rate, it was a joy to hear both of them, and in particular the maiden speaker, the noble and learned Lord, Lord Templeman, who has illustrated once more, as have the other Law Lords who have taken part in these two short debates, the great value to this House as a legislative body of having a direct component from the judiciary. A great deal of gain is to be had from it. We have not only enjoyed them, but we and other people will have gained great knowledge and wisdom from their collective and separate opinions.

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This debate on paper is a debate about Williams and Glyn's Bank v. Boland, which was a case about the registration of property rights. There was once a Lord Chancellor called Lord Northington who is credited with the saying. "If I had known when I was a young man that these legs would one day support a Lord Chancellor, I would have taken greater care of them". I have often reflected in recent years about the wisdom of this aphorism. I would translate it by saying that if I had known when I was a young man that one day I would have to answer as Lord Chancellor on the subject of land registration, I would have taken more trouble with my Bar exams, because I do not claim that this topic is necessarily my long suit in the matter of law.
I am sure that I was right, having regard to the criticism which the decision in Boland gave rise to—despite the solid conviction, which is not confined to this case, of the noble and learned Lord, Lord Denning, that he embodies the law—in referring the difficulties to the Law Commission. I should like to express my thanks to the Law Commission and their distinguished members on having given us such an interesting report. At this stage I must challenge something which my noble and learned friend Lord Simon of Glaisdale said at the outset. He twitted me. during his sponsorship of the Second Reading of his co-ownership Bill some two Sessions ago, for having said something which was wholly divorced from the subject matter of the Bill. I plead not guilty to that charge. I plead not guilty to it on two separate grounds. The first is highly relevant to the third of the questions which he posed to me this evening.
The noble Lord, Lord McGregor of Durris, talked about social justice and what the people want. He seemed to think, as did the noble and learned Lord, Lord Denning, that what the people want is the co-ownership Bill. I must tell them both absolutely flatly that they could not sit for a week in the Lord Chancellor's office and believe that. As I said when this Bill was debated for the first time two Sessions ago, the great and decisive change in the mood of the public about matters with which my office is concerned is the extreme dissatisfaction and concern with the laws about matters ancillary to divorce.
It is in fact a source of constant communications from Members of Parliament and from their constituencies which come literally in shoals to my office. It was for that reason that one of the first things I did in my present term of office was to refer to the Law Commission the question of the partition of matrimonial property after divorce. That resulted in Law Commission Report No. 112. which I believe is far more important as a matter of priority than anything we have been discussing this afternoon, and that has not been put into law.
I have said this to your Lordships before but I say it now again: one very wise Lord Chancellor once said that law reform is either by consent or not at all. Another one said that it takes three successive Lord Chancellors to push through any important law reform. I am quite certain that I was correct when I pushed hard for the recommendations of Law Commission Report No. 112 to be put into law, and I
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got Government approval for the policy. Unfortunately, in the way things are, I failed to get a slot in the programme. But if I had had to choose to put Law Com. 115, this one, into operation before 112, I know what my answer would have been. I know that the priority about these unhappy, broken marriages, and these unhappy children—the result for them—is infinitely more important than that, and I was bitterly disappointed when I failed to get a slot.
Happily there is in another place at the moment a Private Member prepared to take on Law Comm. 112, and happily I was able to get parliamentary draftsmen to draft a Bill which will carry its provisions into effect. But there is where the public want social justice; that is where they are not getting it. That is where the shoe is pinching, and it is not, with great respect, where the noble Lord, Lord McGregor of Durris. is putting it. I have not, I think, had one communication from a member of the public pressing for this, but I must have had literally hundreds of communications on Law Com. 112. There, therefore, is the first ground on which I challenge the charge brought against me by my noble and learned friend Lord Simon of Glaisdale.
I would also say—and I say this again to both the noble and learned Lord, Lord Denning, and to the noble Lord, Lord McGregor of Durris—that litigation between husband and wife upon the ownership of property during the course of a marriage in existence and happy is virtually non-existent nowadays. It used to be virtually non-existent and it is now. The occasions when the enforcement of these rights will arise would be either on the termination of the marriage through divorce or separation, or on the death of one of the parties. When we hear this eloquent talk about, "We wives must have rights which can be enforced in the courts", or, "We men must have them", the reality is that it is the potential successors on intestacy or on a will, or alternatively the parties to the marriage after they have broken up. who will be seeking to enforce those rights. It does not therefore appear to me that these provisions, against which I do not say anything in principle, are necessarily the most important priority we have to consider.
But I would say—and I think this has a good deal of relevance to the subject—that matrimonial co-ownership is coming and has come to a quite extraordinary degree. I think I am right in saying that at the time when the original Law Commission report was put forward about one-half of those couples who entered the matrimonial state registered their houses or homes in joint names. The proportion now, I am told, is 75 per cent. The question which one really must ask oneself in the light of that fact is how far it is prudent or socially desirable to legislate for the remaining one-quarter, not knowing (because one does not know) whether the original owner of the house was the wife or the husband—everyone assumes it was the husband, but it does not follow—or who put up the money for it or whether the parties have deliberately arrived at other arrangements which suit their particular situation rather better. It is not simply the Lord Middleton case, if I may call it that, although that was. I thought, and my noble and learned friend agreed, a valid case.
Perhaps I might put it this way. Suppose I got married again. I was for 34 years the male partner in

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a happy marriage which resulted in five children. Would it necessarily follow that my new wife would take half of the principal asset I still possess? Would not the children have something to say about it? Of course, you can contract out of it, just as the wife can register her right of possession. How far is it a good thing that you should seek to legislate for people in relation to one of the most intimate matters of their lives—the distribution of marital property—when the marriage is still in force and when the only time when it is ever likely to be litigated is when it has broken down by death or dissolution? I do not think the matter is as obvious as some speakers have treated it, and I thought that the noble Lord, Lord Mishcon, got a rather unduly rough ride from some of my noble and learned friends. I think the matter is not clear.
It must be clear from what I have said that I do not have a slot in the Government programme this Session for law reform. The one I fought for and lost was Law Com. 112, and that I would still put first; and it follows that I do not have a slot for Law Com. 115. But if I were persuaded that the co-ownership Bill, as modified by the second report, was intrinsically something which was as urgent as some speakers have made it, I would of course combine it with the Boland provisions exactly as the Law Commission has proposed. But so long as there is a question mark—and the speech of the noble Lord, Lord Mishcon, at any rate establishes that there is a question mark—over the desirablility of the co-ownership Bill, even in its amended form, then I cannot accept as a principle that it must be married to the Boland provisions as part of an indissoluble pattern.
I see the argument put forward by my noble and learned friend Lord Scarman. It was a package in the eyes of the Law Commission. I agree with the noble and learned Lord, Lord Gardiner: prima facie one should treat the Law Commission as right. I regard myself as the trustee for the Law Commission in this House. I have tried, inside Government circles, to implement as many of its proposals as I could in the order in which I thought them important and not necessarily in the order in which they were delivered. At the same time, I do not regard these two points as indissolubly linked. If co-ownership be right, then I think they are linked as a matter of convenience and desirability. So long as there is a question mark. I think there is a question mark about their indissolubility.
One of the sad things—though I hope this debate may have put it right—about the sequelae of the Law Commission's report is that after its publication I sought reactions from the legal profession generally and from sections of the public with a particular interest in the Boland problem and its solution. But alas! no more than a handful of comments has come back so far, and I think it would be unwise to offer even a tentative view on the eventual outcome. However, my noble and learned friend has introduced a debate which will be studied by the Government and my office and will to some extent remedy the defect in the reaction to the Law Commission's report, because it has been singularly well-informed and will be very helpful in the advice about Government policy which in the end I shall have to give to my colleagues. I hope, too, that the reports of this debate, if they percolate
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through to a wider circle, will excite further comment both from those who are interested in land registration and those who are interested in matrimonial property, and certainly whatever has been said will be taken account of most seriously.
I have dealt with the question by my noble and learned friend Lord Simon of Glaisdale about the promise of early legislation. Obviously, when those whose views have been sought have given us an answer we shall give prompt consideration to its inclusion in some future Government programme. I can see no chance this Session, and if there were any chance I should put my money on Law Com. 112. The Government are not convinced one way or another on the indissolubility of the two groups of proposals, but I have tried to give the best answer I can at this stage. I may change my mind—I am notorious for sometimes doing so, and I reserve the right to do so—but I do not myself regard the proposals as indissoluable.
As regards the first question, the Government have no concluded view on the totality of the recommendations. That does not diminish the value I place on the Law Commission's report, although I have been very candid with the House in saying that there is another report that I shall try to legislate before this one. I think that other one is more important, and I believe that the amount of human unhappiness which is caused by the matters it deals with justifies my giving it priority.
Having said that, there are a few comments I wish to make about the more recondite aspects of the matter. If one assumes for a moment that, at any rate in principle, it is true, as the noble Lord, Lord Mishcon, suggested, that co-ownership can be severed from the rest of the problem and can be treated independently, a relatively straightforward solution might be simply to restore the decision of Lord Templeman at first instance. That would mean that the wife who had no legal interest in the home, but had an equitable one, would be protected if she registered. The objections to that have been well stated, and I shall not rehearse them again.
I think that there is a tendency to underestimate the extent to which a wife's interests may be protected under the existing registration law. Mrs. Boland, for instance, could have protected her interest in at least three ways: first by registration (under Section 58(3) of the Land Registration Act); secondly, by a caution (under Section 54 of the same Act); and, thirdly, by the registration of a right of occupation under the Matrimonial Homes Act. It was I think as recently as 1981 that the noble and learned Lord, Lord Simon of Glaisdale, earned the gratitude not only of the House, but of the community, by introducing the Matrimonial Homes and Property Act, which improved and refined that protection.
While not wishing to minimise the difficulties created by the Boland case, or the prejudice that might result from its reversal, it must be said that it has been part of our law for over a year now, and that in fact conveyancers have come to terms with it—and come to terms with it fairly well. Contrary to their predictions, the world has not come to an end as a result of the decision in Boland in the Court of Appeal and the House of Lords.

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Conversely, I must say that the victory that Boland appeared to have won for wives in their struggle with their husbands' creditors has now been demonstrated by the Law Commission to have been a modest, if not hollow, one. Admittedly Williams and Glyn's Bank failed in its attempt in the particular case in question to enforce its charge on the home, but if it had gone one step further and issued a bankruptcy notice against the husband, then the house would have had to be sold under the bankruptcy. The Boland problem may be a tough nut to crack, but it may very well be that it is not so hard or so tough that we need to resort to a sledgehammer.
I think that I have tried to apply, as I always do in these debates, a critical eye to the speeches that have been made. When all the speeches have been one way, I do not think that it is my business to say, "How-splendid!" and then leave people to think that there are no arguments on the other side. I retain the horns and tail of the advocatus diaboli which I assumed in the first of our two debates. Nothing that I have said diminishes my gratitude to the speakers, and nothing that I have said diminishes in any way the welcome and the admiration that I have already extended to the noble and learned Lord, Lord Templeman.
7.33 p.m.
Lord Simon of Glaisdale: My Lords, with an important debate still to come, your Lordships will excuse me if I do not try to cover all the points raised—in particular, since many of them were answered conclusively in later speeches. I refer in particular to the speech of the noble Lord, Lord Mishcon. which was conclusively answered by the noble Lord, Lord Hooson. I am sure that he was right in saying that the Law Commission looked at the problem as a whole. It is quite unacceptable, it would certainly outrage every woman's organisation in the country, if one picked out the part that was acceptable to banks and conveyancers.
I should, however, like to mention three particular speeches. The first is that of my noble and learned friend Lord Templeman. Those of your Lordships who had not previously heard him and who have now heard his maiden speech, will understand well the reputation that he has for clarity and felicity of utterance on difficult subjects. The second speech is that of the noble Lord, Lord McGregor of Durris, who modestly described himself as a layman. He was I think the only non-lawyer who spoke, but of course he knows as much as, if not more than, any lawyer about this branch of the law, and he adds to that his great expertise as a sociologist.
The third speech is that of my noble and learned friend on the Woolsack, because it stands unanswered. When he says that he regards it as far more important to legislate to remove the grievances of divorced husbands than to legislate to ensure the rights of a woman who stands by her marriage in the matrimonial home, I can only say that I completely disagree. I would ask him to weigh the letters that MPs send on from constituents against the evidence of the social survey that was quoted by the noble Lord, Lord McGregor.
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I say again, as I said at the beginning, that to pick and choose in a report where the Law Commission looked at the matter as a whole could not possibly be accepted. The noble and learned Lord suggested that since 60 per cent. of people in any case live in co-ownership, it was not worthwhile legislating for the 40 per cent. To that there are two answers. One is the striking phrase of the late Professor Freeman, who lost his life so tragically outfacing a mugger, that the law must take account of the pathology of legal and social institutions. The second answer is that the Law Commission obviously did not take the same view after two years' scrutiny as that taken by my noble and learned friend on the Woolsack. Having said that. I beg leave to withdraw the Motion.
Motion, for Papers by leave, withdrawn.

International Deficit Finance
7.38 p.m.
Lord Lever of Manchester Lord Lever of Manchester rose to ask Her Majesty's Government what are their policies in relation to international deficit finance and the banking activities relating to it.
The noble Lord said: My Lords, in a sense. I feel deeply apologetic that so mighty a subject should be confined to such a small space, at such a late hour. Nevertheless, it might act as a warning for a future occasion when we may be able as a House to discuss the subject more volubly and more spaciously than is possible tonight. I want to discover from the Government what is their response to the dangerous threatened banking crisis in the world and the general monetary instability that exists throughout the world. I also want to know what proposals they have for their contribution to easing some of the anxieties and threats which beset us.
I hope that the House will forgive me if I go into a little past history. How did we get into this position? The central reason is that the twentieth century offers ever-sharpening choices to the peoples of the Western world particularly. Are they going to learn how to co-operate prosperously together, or are they going to regress into the kind of chauvinist unilateralism that brought so many disasters that shamed our great continent in the pre-war period?
Every so often the regression to chauvinist insularity takes over from the good sense which ought to have dominated us in the post-war period, because we started on the right lines. We came to recognise that. in a world of ever-growing and indeed accelerating interdependence, we had to build bridges between legitimate national decisions and the world global commitments on which we all depend for our prosperity.
In the financial area and in the economic area we built two great bridges between the interdependent requirements required to protect our global interests. The two great bridges were the Bretton Woods monetary system and the GATT trading system. This danger and difficulty with which the world is now faced arises primarily—and I shall have to put it briefly. I cannot go into the details of it. much as I would enjoy doing so—because the leaders of the

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world, as the 1970s approached, chafed under the disciplines of the co-operative systems of Bretton Woods and the GATT and a mighty tendency to regression to an insular chauvinism took over, under the misguided belief that we would somehow add to our autonomous powers of lifting our standards of life if only we could escape from the restrictions that the international disciplines imposed upon us and upon our parities and our trading principles.
This is the short-sighted view of the one-eyed man. As the character in Dickens said, "He had but one eye and the popular prejudice runs in favour of two". My prejudice continues for both eyes. You have not only to look at national interests but at the global interests which are crucially necessary in a modern world to preserve your national interest, and an integral part of it, if we are to prosper. Our leaders, to their shame and to our danger—and to our injury, from which we are already suffering—kicked down the Bretton Woods bridge and started to undermine the GATT bridge between national decision and the protection of global interests involved in interdependence.
In the early 1970s they finally destroyed Bretton Woods. They pledged firmly and solemnly that they would put something better in its place—rather like those internationalist friends of mine who want to tear down the European system of co-operation only in order, of course, rapidly to build a new, better and flaw-free edifice. Of course, none has appeared. There was no new system. We had, in effect, a leaderless financial situation in which currencies yo-yoed up and down, reached parities up and down that nobody would have dreamed of bringing about as policy and nobody could have dreamed of as related to economic fundamentals, while Governments, enthralled by their own doctrinal complacency, would prate about how sound it was for the market to decide on these matters without the clumsy and unknowledgeable interference of Governments—with becoming modesty, which, alas, they tend to confine to the areas where they ought to be more active; a modesty not often very much in evidence in many other areas. They said that the currency must be left to yo-yo about, whatever the consequences to our standard of life, whatever the consequences to world trade and the like.
This is the context in which we now have the banking crisis. Very briefly, the immediate occasion was the formation of the OPEC cartel. It created an urgent need for the poorer countries of the world to receive some finance to enable them even to maintain their meagre standard of life by importing the oil necessary for their modest economies and to allow for some possible expansion. Everybody recognised the need for it and no Government was willing to take any of the thoughtful and collective actions required to bring it about in an orderly and sustainable way.
While Governments were casting about, a bright thought occurred to them that all this could be done painlessly through the Eurodollar market. I do not have time to expand on the Eurodollar market. It is a market which escapes very largely the kind of regulations which would impede the flow of funds required to channel the idle funds of the world in precisely the growing inter-dependent situation which I have described; so that it has a positive purpose. But if you put upon it tasks which it is not capable of
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fulfilling and if you allow it to fulfil any of its tasks without that minimum structural bank regulation which every civilised country enforces on its own domestic banking system, you are asking for trouble.
Now we have got it. Everyone was very pleased about this when hundreds of billions started to move in this way. Governments were happy. They did not have to examine their complicated budgetary mechanisms to see how they could accommodate with the crucial needs of the 20th century. That is one of the things that most treasuries all over the world try to avoid; that is, any scrutiny of their 18th century and 19th century ideologies which would need to be brought up to date if they were to meet the real tasks of the 20th century. The treasuries were relieved that they did not have to strain themselves in this agonising way.
The bankers, on the other hand, were making (on paper, at any rate) what seemed like large profits; so that everybody was happy. And the leaders of the Western world, whose reflexes always favour thoughtless inaction, gratefully sat back and felt that nothing more was required to deal with this crucial problem of financing the deficits of impoverished countries caused, in the first instance, by the OPEC cartel. What could be more satisfactory? Why should they do anything? What could be more enjoyable than the financial conjuring trick which transferred hundreds of billions, and met the economic and political purposes of government, on the one hand, without offending a single treasury shibboleth on the other? And treasuries that would have reacted with implacable hostility if somebody had put up to them a rather rash demand for a £3 million factory in the United Kingdom, watched benignly while £50 million to £80 million were subscribed to put them up in Zaire. Zambia or in the middle of the desert. As long as the funds were moving the treasuries were happy. All this was done so agreeably by mirrors, and without pain.
There is a great flaw in all this. This money was not lent because these people were creditworthy; it was based upon need and appetite, a dangerous conjunction, if I may say so, in the circumstances in which this money was turned loose by the hundreds of billions. So the money flowed. With the lack of creditworthiness, why did they lend—these shrewd, tough bankers, approved by their shrewd, tough, and thoughtful Governments? They lent because they said, "That is quite all right. Sovereign borrowers never go bankrupt; they just go out and borrow the interest and borrow the repayment money from somebody else". They would all be like the old lady who said, "Thank God, I have just borrowed enough money to pay off all my debts".
This chronic condition, they believed, could go on forever. But there is a snag in it. It depends on credibility. The trouble was that the people they were lending to did not only have to borrow year in and year out to get the money to pay the interest, and to pay the money back; they were all running chronic deficits and had nothing to pay the interest with. They had to borrow new money to sustain the fairly pitiful standard of life that they were then enjoying. They found, to their amazement, eager bankers of the Western world hurling themselves at them with hundreds of millions indiscriminately.
Let me point out that the trouble was made worse by the high interest rates and the brutal adverse change in the terms of trade which the long recession brought about. Let nobody persuade themselves that this ramshackle lending, predicted and predictably due to collapse one day, would not have collapsed anyway, but would have collapsed somewhat later. That is the best that you can say. If we had deferred the high interest rates and if we had not had these adverse terms of trade because of the recession, the structure of the lending had a built-in self-destruct of rising incredibility which doomed it from the day it started and guaranteed that, whether it be three years, five years or 10 years, it had to collapse in the end.
I venture to repeat what I said the other day. that the whole of the lending system, based not upon credit but credit-worthiness of the borrower and the ability to go on borrowing ever ballooning sums, is precisely the structure of the chain letter, and not surprisingly has the ultimate stability of that system. It is strange that it should be applied to lending on this scale internationally and should have been approved by Governments for so many years. Governments brush aside the criticisms, but reality has broken through. Huge defaults threaten: banks are no longer prepared to keep the chain letter going. Banks are trying to rescue the money that they have going in. and they are finding that not only can they not rescue the money that is going in but they can only preserve its apparent value in their balance sheets by lending new money.
So we find that the banking system of the western world has become hostage to its impoverished debtors. That is a strange situation. One has to ask why the Governments encourage this. They accept an intellectual indolence and an unwillingness to tackle the problem in the only way it could be satisfactorily tackled, which is internationally and co-operatively. It is a measure of their resistance to return to international co-operation that they were prepared, instead, to sanction this manifestly dangerous system.
Do not forget this, that it is very easy to criticise the banks, but if the banks had not stepped in the Governments were in no condition to do so. If this lending had not taken place we would have had disaster eight years ago. Although I am not without severe criticism of the banks for accepting for so long the Governments persuasions—not to mention arm twistings—that went on in those days, and is still going on now, the Governments are now in a most ambivalent position. On the one hand, they keep saying, "The bankers are very reckless, stupid chaps; everyone know that is a reflex of bankers; they are stupid chaps; they have lost money, and that is too bad." At the same time, with another voice they are going round saying to them: "Please lend more or there will be a ruinous slump in the world and a very grave series of political disasters to go with it". That is a very strange position for the Governments.
But we now find that we are facing the following dangers—and I am sorry to be terse in summing them up. The banks are facing a highly dangerous combination of deposit withdrawal and non-performing assets. At best, that will lead to sharp pressure on their cash flow and to a sharp contraction in their lending, not
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only to the less developed countries of the world but throughout the world in their international lending and even in their domestic lending. So, far from expecting even the puny recovery which is being predicted in the leading Western countries for next year, if this goes on we shall have a deepening of the recession.
However, that is the best case. I dare not contemplate the worst. Assuming that Governments were to continue at the abysmal level of reaction which they have shown in the past eight years—I do not believe that they will, and there is very good evidence for believing that they will not because of the American Government's reaction, but if they were to go on as they are doing—we would face the dangers of a world trade collapse, a serious danger to the banking system and the destabilisation of every one of the borrowing countries politically, economically and financially.
But let me say this. In the best case, if we shovel together enough money to keep the old charade of the money that has already gone looking all right, and if we do not provide an adequate flow of new lending, then any abrupt reduction, in the flow of lending, however well justified on economic grounds and on the grounds of profligacy in the past, any abrupt withdrawal of funds to these fragile political and economic systems in South America, Africa and Asia, will absolutely guaranteee to destabilise their economies and their politics. Any withdrawal has to be a phased withdrawal and has to be based upon collective international decision, which means that at whatever level we require the funds to go it should be dependable and based upon conditions which are in the interests of those countries as well as protecting the legitimate political and economic interests of the West. They are not in conflict with the welfare of those countries.
In the past, no kind of restraint was placed upon the bulk of these funds, these hundreds of billions. They financed steel mills in South America and elsewhere to add to an already difficult steel situation. They added subsidised steel production more incompetent than any that existed in the world. I am not talking about the Far Eastern steel mill finance, which was profitable and was well run. But it is haphazard and ramshackle in its method, and haphazard and ramshackle and damaging in its consequences. Far from helping the world to cope with the restructuring process which is always going on in the world—and today it is at an accelerated pace—it actually made it worse.
What are we going to do about it? The remedies must be stated. The House would not share my ecstasy if I were to continue in detail on the mechanics, but I have to say this. No piecemeal panic solutions that are being employed at the moment will do more than postpone the crisis. All that will happen is that the crisis will build up further. You have to replace an intellectually indefensible system for financing a third world deficit and a poorer countries" deficit with one that makes sense. The only one that makes sense is a co-operative world effort, and it is to that that I hope the Government will respond. You have to stabilise past lending and ensure a future flow of lending on a basis which makes sense, because it will enjoy a surveillance which will both discipline and support the banking system in so far as it has a role to play.
That brings me to my conclusion. I beg the Government to respond to Secretary Regan's magnificent change of heart. He has called for an international co-operation that will deal with this crucial deficit problem in the only way that it can be dealt with safely, and has also quite rightly related it to an attempt internationally not to create a rigid system of parity control or management but to eliminate the grosser distortions in parities which result in ludicrous rates of interest unwillingly forced on even a Government like the present one. anxious to bring down interest rates but being caught in the eddies of the market and forced to send them the wrong way.
My final words are these. Clemenceau said:
"Courage is when fear makes you run forward rather than back".
I am delighted that Secretary Regan and Secretary of State Schultz are fearful, and I am even more delighted that their fear has given them the courage to go forward, to overthrow their old, repeated shibboleths. I hope passionately that they will find a response. I have been rather saddened that it has been so late in coming, but I am sure we shall have it, and have it soon.
8.00 p.m.
Lord Soames: My Lords, I am sure the House will be most grateful to the noble Lord, Lord Lever, for having introduced this debate, short as it has to be, on these vital subjects. When my noble friend Lord Cockfield spoke in the economic debate on the Address, he addressed himself essentially to the position of our economy here at home, and his only reference to the outside world was one of making some fairly threatening noises to some of the more advanced developing countries.
I think that that was perfectly understandable in the context of the particular debate, but what I think is important is that it should not lead us to forget that we live in an essentially interdependent world, not just in matters of trade—we have all realised that many years ago—but also in all that concerns the economic climate of each of our countries in the Western world, and indeed between the Western world and the developing world. For instance, if the industrialised countries were to try to pull the world out of recession by each and every country seeking, as it were, "to do its own thing" by exporting more and importing less, that would get us into a worse situation than we are in at the present time. I think that this debate will serve to concentrate our minds on a vast and vital subject, in that it will lead us to look essentially at the problems of the world economy.
My Lords, do you not sometimes think how extraordinary it is that we allow ourselves to be taken in on these matters by our own rhetoric? One or two years ago, was it not common parlance to say that if only we could get inflation down and if only United States interest rates would come down to single figures, then the United Kingdom's interest rates would follow them down and everything in the garden would be lovely and rosy, and at least we should be seeing signs of the end of the world's recession?
In fact, all this has come to pass; but in spite of it the economy of the United States and indeed the economies of countries throughout the industrialised
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world remain stubbornly stagnant and there is still no sign of any general increase in demand sufficient to pull us out of this recession. Meanwhile, as the noble Lord, Lord Lever, said, we continue with exchange rates moving as violently as ever, continuing to defy accepted economic theories—for when inflation in the United Kingdom was nearly 20 per cent. the pound stayed high; yet with inflation now at 7 per cent. the pound is much lower than it was then. So surely we must see by now that just to reduce interest rates and control inflation—useful and highly necessary actions in themselves—simply is not enough to get the world economy moving again. I have often said before—and I referred to this in the speech I was bold enough to make to your Lordships in the debate on the humble Address (at col. 276 of Hansard on 10th November 1982) and I was very pleased to hear the noble Lord, Lord Lever, make almost the same remarks this evening—but perhaps I may repeat again that we shall not get back to the growth rate we need, we shall not bring the recession to an end, we shall not remove the risk of moving from a recession into a world depression unless we tackle the roots of the problem.
First, we have to get some semblance of discipline into a new international monetary system. Secondly, we have to create again a mood of liberalisation rather than restriction of international trade. That is why I said then that I thought the big benefits of the 1950s and the 1960s—those golden years of growth—were due largely to the existence of the Bretton Woods system and the liberalisation of trade which flowed from different rounds of the GATT.
And of course, the two poblems are closely related. Take, for instance, the habit of petro-dollars of floating around the world like an oil slick at the mercy, as it were, of wind and tide, polluting first one international currency and then another, carrying what the noble Lord, Lord Lever, I think called "not properly used funds", and with a lot of speculation riding on their back and the movement of exchange rates totally disconnected, with internal economic factors following thereon. When they rise too high, industries become less competitive and that feeds the protectionist moods and inclinations. This is indeed what we are seeing today.
Superimposed on these two problems of parity movements and international trade, we have also to contend with a comparatively recent but none the less real problem to which the noble Lord devoted himself for most of his speech. It is commonly known as a banking crisis, but I prefer to refer to it as "a borrowing and lending crisis". What it must not turn into is a crisis of confidence in the banking system. Banks which have been too permissive will of course have to pay for their lesson and countries which have been too profligate in their borrowing and spending will need to draw the correct lessons and conclusions therefrom. But—and here I would support so much of what the noble Lord said—we must not go from one extreme to another because it would be a tragedy if sovereign loans from commercial banks to developing countries were to dry up.
The Western banking system has to sustain its confidence and arrangements have to be made of an international character to help it so to do. Ways have

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to be found around the problems of existing indebtedness in the third world and new money for sovereign loans has to be found, albeit with much greater stringency than in the past. Industrialised countries will need, if we are to get out of this recession, the demand which the markets in the third world can generate, just as developing countries need our markets for their manufactures and raw materials.
These are the problems which have to be resolved, if the world is to heave itself out of recession. We have to sustain our liberal trading system, we have to get some measure of discipline back into international money markets and we have to encourage sensible growth, which is necessary for social stability in the third world. I believe that we now have a chance. We have a chance principally because more people are thinking along these international lines and because of the imaginative recent thinking and actions of the US Administration—in particular, Mr. Regan, Mr. George Schultz and the Federal Reserve—in two important areas.
First, ever since this Administration came into power, they have said that the money supply was their principal concern. They minded more about that than anything else. In 1982. their money supply targets—Ml, M2 and M3—have all been overshot consistently. Yet during 1982 their interest rates have been considerably reduced and it seems that they are continuing along that course. I presume that Her Majesty's Government will welcome this action of the United States Administration—indeed, I hope they will—as an endeavour to get demand going again, and that the US lowering their interest rates will enable other countries such as ourselves to follow in their wake.
For interest rates today are no longer what they were and should remain; namely, a reflection of the health of the economy of a country. We have got to the point where, with all this money floating around the world, we are not bring down our interest rates unless the other fellow does, for fear of too much money flowing out into some other home. So I hope that we shall be able to follow this. I shall be grateful if the noble Lord, Lord Cockfield, feels able to confirm this when he replies.
Secondly, Mr. Regan has expressed a desire to put a cap on the explosive exchange markets—I put it no higher than that—and has given a strong hint of wanting to discuss with his colleagues in the Group of Five the possibility of another conference to this end, for which, in shorthand, he used the concept of another Bretton Woods conference. Hooray! At last! May it proceed with all speed, and I hope that it will get a very positive reaction from Her Majesty's Government. Thirdly, I believe that we can see the international approach to the banking problem for which the noble Lord called. I believe that this is possible and likely to be forthcoming.
So I repeat that I think we have a chance, provided that all countries concerned are sufficiently international in their thinking. Of course, if countries were to pursue policies of competitive devaluation and were to announce ahead of time, as the Labour Party has done, that if it got into power it would have a 30
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per cent. devaluation, then we should be lost. Others would do it, it would be highly catching and we could kiss goodbye to any prospect of recovery at all.
There is always a fear that, as recession continues and creates more havoc within our economies, some governments will be tempted to turn in upon themselves even more, to become more chauvinist, more insular, more unilateral and more protectionist in their thinking and in their policies. We want no more of that. We want that like we want a hole in the head. On the contrary, the need is for countries in the developed world, particularly those with the responsibilities of leadership by virtue of the importance of their currencies, to become more internationalist in their attitudes. I hope to see Her Majesty's Government in the van of this movement. Why? Because only thus will the world get through this dark tunnel in which we hve lingered too long, largely from lack of ability to master the fundamental problems that oppress us.
8.16 p.m.
Viscount Chandos: My Lords, last week it was suggested in your Lordships' House that companies' accounts, although appearing dull. in fact contain within them great human drama. The subject which the noble Lord, Lord Lever, has introduced tonight could be seen as even more esoteric and incomprehensible, but it also contains within it human drama on the highest scale. Indeed, a number of my fellow bankers have found even richer pastures than the profession of banking, in writing best-selling thrillers about economic armaggedon brought on by the collapse of the international banking system. Even cinema audiences have been shown the tightrope which international banks have to walk and the consequences of the system breaking down.
While this essentially terrestrial subject may have caught the attention of only comparatively few people. there is nevertheless an awareness among customers of banks throughout the world of the problems which now confront them to a greater extent than at any time during the last 50 years. For that reason, not only your Lordships but many other people will be grateful to the noble Lord, Lord Lever, for raising this Question at a time when each edition of the newspapers, and not just the financial ones, brings more news of sovereign Governments acknowledging their severe financial problems.
The attention which I believe may be fixed on this evening's debate, and the task of following both the noble Lord, Lord Lever, and the noble Lord, Lord Soames, give rise to a feeling of awe and in view of the late hour at which the debate has begun. I propose to make few points. I should say at this stage that, while I hope I may speak not only for my noble friends in the Social Democratic Party, but also for my noble allies on the Liberal Benches. I do not in any way express the views of the bank for which I work.
The desperate plight of many developing countries means that many of your Lordships may connect such countries, first, with the problem of international deficit financing. I should like to suggest, however, that, important though this aspect of the problem is,

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the question is wider still. Some of the most industrialised and developed countries in the world currently have major international financing requirements. France and Sweden are two obvious examples and, before any of the noble Lords on the Benches opposite attempt to draw conclusions. I think it would be fair to say that both countries had substantial requirements under their previous Governments. Indeed, there can hardly be anyone better than the noble Lord, Lord Lever, himself, in understanding the problems of financing a developed country's deficit.
We may in this country, therefore, be able to look at the problems now and consider them in some respects with detachment, thinking only of our position at the hub of the international financial system. But this Government, or a future Government of whatever political hue. may well find that it is looking at the question from a different angle, not necessarily through any fault of its own, but because the different economical cycles of countries give rise to substantial variations in their balance of payments, both on current and on capital account.
These ebbs and flows which apply also to the smaller and developing countries are, in my view, an infinitely preferable economic environment to that which we saw in the early 1970s of economic convergence. The coincidence of expansionary economic cycles in all the major economies in the world gave rise to an overheating of the world's commodity markets—not only that of oil but of virtually all the other major natural resources—with whose inflationary consequences we are still grappling. We are perhaps now in danger of economic convergence of another sort, with all major economies heading into deeper and deeper recession and Governments fearful of expanding demand precisely because the balance of payments consequences may be so difficult to resolve in these nervous times. We must not, therefore, in trying to resolve the current problems, impose constraints on the system which would unnecessarily inhibit it from smoothing out the financing requirements of developed and developing countries alike, not only because this would lead to those countries currently in greatest need being put under appalling hardship but also because we and other countries currently in surplus may well require a flexible and accommodating system for our own purposes in the future when we move into more favourable cycles of economic growth.
I should say that this point does not rule out the co-ordinated expansion which my right honourable friend Roy Jenkins in another place has advocated because, within a general co-ordinated expansion there will none the less be significant differences of timing so far as the effects and consequential financial requirements are concerned.
The Prime Minister said recently in another place that:
"countries which have over-spent and over-borrowed must reduce their spending and their borrowing".
If the Government are obdurate about their domestic economic policies, nevertheless I beg them to be more flexible in their attitude towards the international economy.
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With 10 further speakers tonight, I shall not prolong my own contribution. There are two problems to be considered: a short-term one and a long-term one. In the short term, we must assist those countries currently in greatest financial trouble without forcing unacceptable deflation and consequent suffering upon their populations, which would at the same time indirectly bring further deflation to our own countries—as the noble Lord, Lord Soames, has pointed out. This will involve in some cases either an increase in aid programmes or a subsidy for those countries' interest costs, at the same time as a significant deferral of repayments. Therefore, governments must, on a co-ordinated basis, give direct help to the countries concerned and simultaneously assist the private commercial banks to maintain and, where necessary, increase their lending.
Unlike the noble Lord, Lord Lever, who suggested this in his recent Churchill Lecture. I do not believe that a further international agency is necessary or desirable to act as a lender of last resort to the international banks committed to financing the deficits of sovereign governments. It has been suggested that commercial banks have exceeded the limits of normal prudence in the loans they have made in recent years. I believe that this docs some injustice to the banking community, in view of the scale and unavoidable nature of the problems faced since 1973. But the introduction of another lender of last resort—or should one say of absolutely last resort?—seems to me to be an invitation to banks to suspend their critical judgment and embark on precisely the type of lending for which they are now to some extent unfairly being criticised.
It must be better for each central bank to give assistance, where needed, to the commercial banks for which it is responsible and for the existing supranational agencies to have their scope widened to provide additional support through the co-financing of problem countries and the provision of facilities direct to the central banks supporting their commercial banking brood. While I believe that the commercial banks have on balance behaved responsibly in the face of extraordinary problems, where they have not it is far easier and more appropriate for their own central banks to judge and apply the correct conditions and sanctions while providing the necessary support.
In this context, I should like to raise a specific point and in doing so to apologise to the noble Lord, Lord Cockfield, for not giving him notice of the question. Countries in financial difficulties do not, for understandable reasons, actually go into technical default in the way in which companies do but often negotiate rescheduling of their repayments and payments of interest without default actually being declared. For this reason, it is often even more difficult to say whether a sovereign loan is actually recoverable and therefore worth anything than is the case with a company where a receiver, and ultimately a liquidator, may be appointed. None the less, it is still sensible and prudent for banks to provide against such doubtful loans in the same way as if they were due from an insolvent company.
Unfortunately, the Inland Revenue is currently indicating that it will not accept such provisions against sovereign loans for tax relief in the way that it

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would for similar provisions on corporate debt. It must be said that, in legalistic terms, since the loans have not formally been declared in default, the Inland Revenue is correct. Moreover, I should be the last person to suggest that the tax burden on the banks in this country has been overwhelming, although its application has been haphazard. But an essentially pedantic interpretation of this problem by the Inland Revenue would be counter-productive to the efforts being undertaken to resolve the problems of international deficit financing and, indirectly, would substantially undermine British banks' ability to finance their domestic, industrial and retail customers. I hope that the noble Lord, whose previous responsibilities will give him such personal understanding of the problem, will make the strongest possible representations to his colleagues in the Treasury.
In the short term, therefore, the Government must, in concert with the other major OECD countries, enable deficit countries to overcome the current crisis and also assist the commercial banking system to provide the necessary new facilities without compromising their vital role in the financing of their domestic industries. In the longer term, the most important single change, which the noble Lord, Lord Soames, put so well, must be an improvement in the level of worldwide demand and trading activity, since that alone can enable countries to service the debts incurred over the last decade.
After that, it is important that funds should be provided to countries, through international agencies and commercial banks alike, on terms which give them some protection from future fluctuations of interest and exchange rates. Most developing countries have no access to funds at a fixed rate of interest, except from such international agencies as the World Bank. As a result, many countries are now suffering from the crippling effects of interest accumulated over recent years at rates of 20 per cent. or even more. Even though such rates may have been low in real terms, in cash flow terms they have imposed an almost overwhelming burden. The commercial banking system has recently developed techniques which enable borrowers, unable to tap the international bond markets in their own name, to insure themselves effectively against future changes in interest rates. I believe that this represents an innovation of real significance for developing countries, to which I hope the Government will give every encouragement.
I should like to conclude, therefore, by joining the noble Lord, Lord Lever, in urging the Government to throw themselves into the task of developing a concerted international approach to this problem, directly and through our membership of the European Communities. The EEC has already established the precedent of helping to finance its own members' balance of payments deficits, through the facilities granted to Italy and Ireland in 1976 and 1977. A revival and, indeed, an extension of such a facility to help non-members as well would be a lead from Britain and from Europe which would do much to overcome the lacklustre reputation of the Community. I ask the Government to apply every pressure to the European Community to take such a positive step.
8.30 p.m.
Lord O'Brien of Lothbury: My Lords, I should like, as other noble Lords have done, to express my appreciation to the noble Lord, Lord Lever of Manchester, for giving us the opportunity to discuss this vitally important topic this evening. The noble Lord has never been in awe of professional opinion, or of the conventional wisdom of professional opinion I expect he would call it, in the financial field and he has always been a most thoughtful and provocative speaker on such topics. In fact, keeping up with his nimble mind was one of the more exhilarating occupations I had while I was at the Bank of England. That is already a long time ago but my noble friend Lord Cobbold was at the bank long before even then—more than 20 years ago. I am sure he will recall that in the last five years of his governorship, he saw across the Atlantic a United States growing at a reasonable rate for a developed economy, having a reasonably low level of unemployment, and having stable prices—and, with that economy, providing a background to a world which was becoming increasingly prosperous and having, in most countries, a reasonably low level of unemployment.
In 1962 all that began to change. The Americans. for reasons which seemed reasonable to them, became involved in the Vietnamese war. which grew more and more expensive. The shortage of dollars in the world. which at one time we thought was to be everlasting, began to disappear. We had a plethora of dollars, because the Americans had discovered that their dollars could be employed outside the USA at higher rates of interest than they could be employed inside the USA due to the effects of Regulation "Q", which limited the interest American banks could pay on deposits with them. It was in that way that the Eurodollar market was born. Once it was born other currencies were added to it, and it grew quickly.
That growth was much increased by the successive oil crises, which produced such large surpluses in the world and such large deficits to match them. Then, as the noble Lord, Lord Lever of Manchester, said, there was this great mass of money washing around the world and being employed by the banking system in activities which were increasingly international. In those 20 years the banking system has become revolutionised. We have now an international banking system with domestic appendages; before those 20 years, it was the other way around. Some of the biggest banks in the world earn more of their profits in international operations than they earn domestically, in one or two cases, notably.
This market came into being and we found that it was beyond the control of national authorities. A large part of it came to rest in London. We knew that if we sought to control it. which itself would be an extremely difficult task, it would simply "up sticks" and go elsewhere to some place where they had no interest in attempting to control but a great deal of interest in deriving the profits from the market. In many ways, that market has served the world well during a very difficult period, but individual banks get deposits and secure even more deposits as these great surpluses grow. Arabs who have large surpluses of dollars want to put them somewhere where they will earn money.

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They put them into the banks and the banks, having secured these dollars and having to pay interest on them, had to earn even more interest to make it worth while. So the business was nourished, unavoidably so.
It is true that the banks were perhaps unduly competitive. They certainly lent at inadequate margins all too often. I will not say that they lent unwisely in the sense that they took on a lot of bad risks. On the whole, they appear to have been good risks—particularly as the noble Lord, Lord Lever of Manchester, said, the sovereign risks. But the whole corpus and multitude of these funds became too great.
Let us return for a moment to the USA. The dollar shortage came to an end in the early 1960s and by the time we came to 1971, the great mass of dollars in the outside world had made it very difficult for the USA to honour them as they were required to do under the Bretton Woods system, by converting them into gold. They were unwilling to raise the price of gold, which in 1968 I considered they should have done. Therefore in 1971 the USA had to destroy the system. They destroyed it because they did not see why the world should not be content with a dollar standard. After all. theirs was the most powerful economy in the world and the world should be content to take dollars—what better currency was there to have? But the world did not feel that way about it and was not prepared to take dollars at a fixed rate. So the USA had to break the rate and in so doing, they broke the Bretton Woods system.
In succeeding years there were efforts to provide a store of value which would take the place of gold. The SDR—Special Drawing Right—was formed but has never flourished since. Whether it will flourish one day one does not know. All that illustrates that the beginning of our problems was the predominance given to internal economic aims over external balance. The Bretton Woods system required that countries which got into external deficit should take steps to correct that deficit. The International Monetary Fund was there to help them and to show them the way in which this might be done. But with the breaking of the fixed rate system, and with the multitude of floating exchange rates, countries felt that they were able to follow their internal aims regardless of external consequences; those consequences were shown simply in the exchange rate and not in any other way that was particularly harmful to them. I believe this was the genesis of the problems in which we now find ourselves.
The countries which are now causing us trouble—and I shall mention no names although we all know that most of them are in South America—are by no means the poorest countries of the world; far from it. But they have become far too ambitious about what they wish to do internally and have assumed far too much debt. They have not been half careful enough about their external balance. I see the problem we now have as being basically an economic problem, and that the banking problem is merely a facet thereof.
The success with which the banking system finances these great deficits, arising from the equally great surpluses, took the minds of Governments off the need for sounder arrangements in financing. That was a very great pity. I remember Mr. Denis Healey trying very hard to achieve enlargement of international
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facilities in order to provide help for deficit countries, and he was rebuffed. It is only now when a real crisis is confronting us that Governments—and particularly the Government of the United States of America—are beginning to feel that something more radical is required to cure our troubles.
The noble Lord, Lord Soames, spoke about the role of interest rates. Interest rates have become very high indeed in nominal terms, but we have to remember that there is a real interest rate and a nominal interest rate. There is a great deal of difference between the two. The other evening the noble Lord, Lord Kaldor. asked one of the Ministers a question. He said that since our economic circumstances now are very-similar to those which existed in the 1930s, why is our bank rate not 2 per cent.? What he forgot to mention was that between 1929 and 1939 prices actually went down slightly. What has happened to prices over the past 10 years is totally different and explains the difference in interest rates.
There has been a great deal of talk about the evils of monetarism. I believe that this Government did themselves a disservice in getting themselves too closely hooked on Mr. Milton Friedman—but, in any economy, a sensible monetary policy appropriate to the circumstances of the time is absolutely indispensable. One has only to look at an economy which provides an inappropriate monetary policy, as I must say was provided by Mr. Heath in the latter half of his Adminsitration, for reasons which appeared to him to be sound, to see the inflation which follows. But an appropriate monetary policy must be backed up by an appropriate fiscal policy. As you will have seen in the United States in the last year or two, it is very hard to persuade oneself that the fiscal policy adequately supports the monetary policy. Therefore, the monetary policy has to be unduly severe.
I get back to the fact that this is a question of economic good sense. Certainly, if we could now have a conference which would get us back to the economic good sense which originated the Bretton Woods system and the disciplines associated therewith the world would be a much better place and the chance of growth would reappear. Meanwhile, we have this banking crisis. As a banker, of course, one does not want to be too melodramatic about it, but it is there and it has to be dealt with. I believe the noble Lord, Lord Lever, has suggested mechanisms and formalities which might help. I myself do not believe that they are runners. My experience suggests that it just could not be done.
What I think must be done is what is being done. First of all, the commercial banks must agree to reschedule the arrangements which have already been put to them; and they must be willing to add a little new money in order to help the liquidity of the countries engaged in correcting their affairs. The International Monetary Fund must back them up by providing medium-term money which will take loans out of the bank books as time goes on. And the central banks must, of course, perform a co-ordinating function. As I can tell from my monthly visits to Basle—I came back only yesterday from the last one; I am something of a bystander nowadays, but I see what is going on—the central banks have this question

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very much under their belts. But they can only provide short-term bridging money, and they can only do it to any considerable degree if their Governments back them up, as I believe they are doing.
It is that piecemeal way, with constructive action on all fronts, minimising the risk of a break in confidence, which will get us out of this. I believe we will get out of it because I believe the degree of co-operation on all sides is now very much greater that it was many years ago, and has been growing all the time. So although I agree with the noble Lord, Lord Lever, that we have a crisis—and I agree with him that something must be done to produce sense and co-ordination out of the whole system, the economic system——
Lord Lever of Manchester: That is all I ask, my Lords.
Lord O'Brien of Lothbury: I think that in the banking world we shall gradually turn this corner.
Lord Cobbold: My Lords, before the noble Lord sits down, may I ask him whether he does not agree that the best way to take an international and co-operative look at this situation—I am talking about the exchange situation particularly—would be to strengthen the International Monetary Fund, both in the amounts at its disposal in one way or another and in the discipline it may be able to hold over the rest of the monetary world?
Lord O'Brien of Lothbury: My Lords, the noble Lord has said what I certainly would have said. That is the first thing. The International Monetary Fund is there, and it has exercised a very beneficial influence on very many countries, including our own. With greater resources its power would be all that much greater.
8.43 p.m.
Lord Ardwick: My Lords, it is just over a month since we had our last debate on economic affairs. We were debating the Address and the Autumn Statement, and this did not give us nearly enough scope to discuss the British problem in the context of the world economic problem. We could only touch on the wider issues, but touch on them several of us did, and got away from the assumption, on which too many economic debates are based, that we live not just on a geographical island but also on an economic island, master of our financial fate, captain of our commercial soul. On that occasion I said that we needed a broader debate, and today we must thank the noble Lord, Lord Lever of Manchester, for giving us such an opportunity. But I wish he had been able to lay his hands, as he himself does, on a better instrument of discussion than an Unstarred Question coming on late in an evening just nine wassailing nights before Christmas and when, outside, there seems to be the last Act of King Lear, being enacted, judging by the thunderous noises we have heard.
The noble Lord has quite rightly restricted his Question, but this is a matter that will not stay within bounds. Every voter knows that there is a world recession and that the current political question is
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whether the Government are making the best or the worst of the adverse conditions in which they find themselves. To most people under 30 the recession is the mysterious visitation of a malevolent spirit, once the subject of their father's boring old fireside lectures. The effects of the recession and the Government's inept handling of it are presented on the television screen and on the front pages of newspapers: but the causes of the recession and the possible cures for it are buried in the arcane columns of the financial pages. The result is that we are in the midst of this banking crisis of which the general political world remains uninformed.
Only now, as elections are near, are Governments of the western system realising that they cannot much longer convince people that there is nothing to do but deflate and wait—wait until the tide turns. Only now, indeed, are the opposition parties presenting positive alternative policies. Yet a purely national remedy can only alleviate the problem and avoid maximising it, as I am afraid this Government seem to have done.
What are the prospects of an international attack on the recession? Even in the past few days hopes have begun to stir. The American Administration has at last seen the light to which some Europeans, including my noble and prophetic friend Lord Lever, have been pointing for months, indeed years. The United States cavalry are not yet galloping to the rescue, but Captain Donald Regan. Secretary of the US Treasury, has ridden forth to spy out the land and work out a strategy for deliverance. The United States, in a remarkable U-turn, has shed its obsession with its inflationary problems now that those problems are much diminished. It is becoming vividly aware of the effect of its domestic policies upon the world. It has seen the western world, of which it is the leader, threatened with possible financial catastrophe. It has seen that its high interest rates have been putting a terrible strain on good American companies: that these rates, coupled with a strong American dollar, were making life impossible for the heavily indebted countries of the third world, further burdened as they are by the low prices of the commodities they export. And not only are the creditor banks facing default and the world financial system put at risk; world trade is threatened still further as the debtor countries are forced to cut imports to balance their external current accounts.
Nothing can have stirred the United States so deeply as the realisation that so much of the debt hangs round the necks of Latin American countries and could threaten the political stability (if you can so call it in that part of the world) of a part of the world which is regarded as indispensable to United States security.
So the United States has relaxed its monetary targets and interest rates and the dollar are weaker. The feeling has grown, even during the past few days, that the banking system is not after all likely to be faced with widespread default. But this is just the beginning. There is no certainty of what is going to happen. The actual management of the debt problems is still ad hoc. There is not the beginning of the system, not even a strategy. I gather the noble Lord, Lord O'Brien, does not think that there should be a system or strategy, but there should be some sort of method. I think he was suggesting.

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How are the third world countries to be not only rescued from their commitments but helped to carry on and restore their economies as well as their finances? I leave it to my noble friend Lord Hatch of Lusby to dwell upon that particular part of the subject.
There is virtual agreement now that the IMF should gradually increase its resources, but that its traditional conditions that its borrowers must aim at a quick restoration of their current balance of payments could make the world recession worse. The problem is to do some kind of justice to those countries and at the same time to exert some kind of creative discipline upon them. The United States has also seen that if its world is to prosper we must find our way back to a new and more flexible version of Bretton Woods, or some other system of stable exchange rates—something which may start with an effort to harmonise the monetary policies of the leading OECD countries.
American commentators are warning us not to hope for too much too soon. United States growth in 1983 may be only 3 per cent., and that starting from a low level, too. The EEC will be lucky to get 2 per cent.
I ask the noble Lord, Lord Cockfield, what are the Government's thoughts on all this? What are their ideas? What are their policies, not only on deficit finance but on the whole range of possibilities opened up by the United States during the past week or two? Do the British Government intend to make a positive contribution to the new thinking? What are their views on the co-operative international effort that is needed to lead the world out of the depths and back to work and prosperity? I hope that the noble Lord will dare to think aloud when he comes to wind up.
8.54 p.m.
Viscount Eccles: My Lords, I intervene in the debate for only a few moments because I want to support the noble Lord, Lord Lever, in his campaign for international action to try to get out of the exchange mess and the mountain of international debt. Like other noble Lords I was glad to see that Mr. Regan, the Secretary of the United States Treasury, appeared to be making a move in the direction which some of us in the debate a month ago on the humble Address hoped he would. I only hope that our Prime Minister and the Chancellor of the Exchequer are urging him forward. It is quite obvious, as the noble Lord, Lord O'Brien, said—and I agree with so much of all he said that there is hardly anything left for me to say—that since Bretton Woods the floating exchange rates have led to a volume of speculation that has been the enemy of steady growth right throughout the world.
I believe that the political factor in determining the various cross rates of currencies has not been given sufficient weight. The leader writer of the Financial Times, my favourite newspaper, I believe on the 4th December, wrote that,
"Exchange rates have often moved against reality, depressing the yen while Japanese exports swept the world and pushing first sterling and then the dollar to ever more uncompetitive heights".
I think that is an out of date use of the word "reality". The writer means that reality in this world is only connected with the balance of payments, but that is nonsense. In the exchange markets the reality is the balance of demand and supply, day after day and week
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after week, and that demand and supply is now influenced very much by other causes than the settlement of what one might roughly call trade debts. First, there is the movement of money in response to interest rates, which is a very big factor. But I am inclined to think that the more fundamental factor is the political factor. That is to say, it is the judgment whether this or that country is a safer or more acceptable place in which to have one's money than another country. The United States is safer than a country that has a frontier with the communist bloc. The yen, on the calculation of economists who are always wrong because they do not take the political factor into account, is said to be absurdly cheap. But if people do not want to have money in Japan the economists will always get their calculations wrong.
I remember in the early years of the war taking Ambassador John Winant to see Dr. Salazar in Lisbon. Winant said to Salazar. "You know, Portugal would be much more popular if you declared war against Japan rather than Germany". Salazar said. "Why do you think that?" Winant replied, "Can't say, just don't care for those Japs". As a matter of fact, that is the kind of thinking which is extraordinarily powerful in the world today because we do not have a system of disciplined budget-keeping which was required when we had the Bretton Woods system.
Take our own currency, sterling. It may be said by the economists to be over-valued, but we have the Prime Minister and the Chancellor of the Exchequer. If we exchange them for Mr. Foot and Mr. Shore, sterling would very soon be under-valued, and that is nothing to do with the economists. It is getting the politics right that matters. We have spent far too much money on schools of economics and professors of this and that, statisticians and all the rest of it, but we do not seem to have got the right politicians who would make the right decisions and then have some chance of a more stable world economy. I agree with other noble Lords that the lesson from this is that we want an alliance of prudent and courageous Governments who will give each other undertakings that they will not overspend. I cannot imagine anything more disastrous than if we had the sort of overspending programme that noble Lords on the Benches opposite are beginning to talk about. Unless we all behave properly, no money will be worth having.
9 p.m.
Lord Hatch of Lusby: My Lords, along with other noble Lords who have spoken, I should like to add my thanks to the noble Lord, Lord Lever of Manchester, for introducing this debate, short thought it has to be, and to join with them also in the hope that we shall be able to debate these issues at greater length on another occasion. If for no other reason than to listen to the speech of the noble Lord, Lord Soames, this debate has been worth while. Frankly, I was amused by the beginning of his speech because he appeared to be virtually quoting from the Conservative Party manifesto and outlining the policy which the Government followed when he was a member of it by insisting that high interest rates must be brought down; that inflation must be reduced and that then everything in the garden would be lovely. He will remember that there were some noble Lords on this side of the

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House—indeed, the whole of this side of the House—who told him at that time that he was wrong, and I am glad that he has found that out.
As regards the issue of devaluation as part of the Labour Party's proposed policy, there may have been a forecast that a new Labour Government would reduce the exchange rate by 30 per cent. However, I would remind the noble Lord that, as he says, exchange rates have become the toys of speculators and that, during the life of his Government, the exchange rate has gone up and down like a yo-yo and certainly has been reduced by much more than 30 per cent. over the past 12 months. Is it not better to do it in a controlled way than by this kind of speculation?
On the other hand, it would not be fair for me to pass the noble Lord's speech by without saying that I heartily agree with the bulk of it, particularly the part in which he emphasised the importance of internationalism in economic affairs. I would only say to the noble Lord. "Yes, we have to be internationalists, but we must also find out the way in which to be internationalists". He emphasises the importance of bringing the third world countries into the market place, and we must find out how we do it. It is upon that issue, and that sole issue, that I wish to dwell this evening.
The noble Lord, Lord Lever of Manchester, in his introduction, and the noble Lord, Lord Ardwick, both mentioned the issue of commodity prices. It seems to me as a layman that, when people talk about there being a financial crisis, it is very much a form of double talk. Are we living in a Hatter's Castle world? As I understand it, money is chasing customers as it has done ever since the petro-dollar years of a decade ago. I understand that there is something like 1,000 billion dollars chasing customers around the world. Is it not our specific duty to connect those dollars with the wealth-producing process? Is not that the real crisis rather than the computer figures that are thrown around the financial papers? For example, the IMF is searching for 100 billion dollars this year, but if it gets it—and it has not got it yet, and the United States is certainly dragging its feet and our Government seem to be following the United States on virtually everything—that only covers three years of the interest payments of Mexico, Brazil and the Argentine. I repeat: it covers the interest payments. That is the scale of the problem that we are facing. It is no radical socialist who has said recently that the world is facing the most serious threat to its entire economic and social system since the Second World War. The man who said that was Karl Otto Poehl, the head of the German Central Bank.
What I am trying to bring again to the attention of the noble Lord the Minister who will be replying is that the crisis that we are facing is not so much a crisis of figures, not so much a crisis of banking, as a crisis of how to relate the needs of the people of the world to the structure which can produce the wealth to sustain those needs.
We have become accustomed over the past 10 years to money being available, first in petro-dollars and now there is the money that cannot be used by the industrialised world because of the recession. It is
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because a great deal of this money had been lent to third world countries that there is such a debt problem today. It is not a problem of production; it is a debt problem.
I would be the first to admit—indeed, it would be patronising not to admit—that a great deal of this money has been misspent. Expressways have been built instead of feeder roads to markets; office blocks have been built when homes were needed instead of shanty towns. There has been lavish consumption in the towns and starvation in the countryside. All that I admit; but I would add the caveat that, with the advertising techniques, with the thrust that there has been for the past 10 years by the banks to lend, with the persuasive methods that there have been, the small and very largely urban élite which has controlled the conduct of the financers of the third world countries, has fallen into many of he traps laid for it by the outside. But these debts are of direct importance to us and they should always be related to the wealth-producing process, because it is they which reduce the purchasing power of the third world countries which could be our major customers.
As I have said to the noble Lord many times before, we are caught in a vicious circle. Previously, noble Lords have spoken about low commodity prices and. incidentally, those low commodity prices have greatly helped this Government to bring down inflation. When you add to the low commodity prices—and I totally disagree with the noble Viscount. Lord Chandos, that we are still suffering from the overheating of commodity prices—the high interest rates that have had to be paid on those loans and the constantly rising import prices that those countries have had to pay, then you can see why at least a third, and probably nearer a half, of the population of the world has such a low purchasing power. As its purchasing power has gone down—and it has indeed gone down over the last 10 years—so those countries have had to cut their imports. They have had no option.
A country in which I have spent the last two years—Zambia—has no foreign exchange. It has to sell copper and with the money it gets today for copper it may be able to buy something tomorrow. As a consequence, they have had to cut their imports. But when they cut their imports, what happens? They reduce employment in the export industries in this country, so our recession is not only created but is deepened. What do we do? We then cut overseas aid: we cut investment in the third world countries: we cut loans to the third world countries; and we tighten up institutions like the ECGD. So, again, purchasing power is cut and, again, the whole process continues until that recession becomes, as I quoted from the German banker a few minutes ago, a world-wide depression.
It is in these circumstances that many people would say, "That is what the IMF is for". Oh yes, provided that the IMF works in such a way that it can increase the purchasing power of the inhabitants of third world countries. But since it introduced the process of conditionality and since it apparently agreed with most Western governments that good housekeeping means cutting down government expenditure, the impact of the IMF in third world countries has almost

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always been to reduce purchasing power still further, particularly in those countries—which are virtually all third world countries—where the government is the major employer and the major investor.
What do the Government have to say about this situation, which I do not think is an unfair description of the way in which we can see the world today? So far as I can see, even though the British economy is going uphill, the Government's remedy for that is to put the brakes on. In overseas aid, in their operation of ECGD, in their reactions to the Brandt Report, in their actions at the Cancun Conference, even yesterday in the Multifibre Agreement Statement that the noble Lord made, in their operations within GATT, in their participation in the EEC's agricultural import policies, their policy appears to be still more strictly and more rigidly squeezing the purchasing power of those to whom we wish to sell our goods.
I would ask the noble Lord to tell us what is the policy of the present British Government on their influence towards the future of the IMF and the funds of the IMF this year. What is their attitude to the United States policy towards the funding of the IMF and the operation and control of the IMF? What is their attitude towards the International Development Association, where, again, I believe that the United States has spread its contributions of three years over five years?
This is an issue which, as the Brandt Report so clearly portrays, brings together the needs of the third of humanity who live in the third world and the people of this country. It is estimated—and it is feared—that there will be no increase in new lending to the third world this year. If that is so, then output in the third world this year will be cut by 3 per cent. because the capital input will be down by 50 billion dollars. What does that mean to us? It means that our growth next year will be reduced by 1 per cent. That is the link. Do the Government recognise that? If they recognise that, what are they doing about it in their own policy and in their influence towards the international institutions that are designed to deal with these very issues?
What I am suggesting is that any sensible British Government today would be investing in the purchasing power of those potential customers that consist of about one-third of the population of the world; that they would be using all their influence, along with our friends, in reforming the international economic and financial system; and that these are the measures which alone can restore our position, which so much depends on our operations as a trading nation.
9.16 p.m.
Lord Benson: My Lords, I feel like Ruth gleaning in the cornfields after seven noble combine harvesters have been over the ground. Ever since the beginning of time the economies of the world have moved in cycles; periods of expansion and growth have been followed by periods of recession and stagnation. When the recession comes we all see, with that brilliant gift of hindsight, how over-trading should not have taken place, and we look for remedies for present discomforts. That is just the situation we are in now, but it has been exaggerated by the fact that it is not just one or
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two economies but it is practically all the economies of the world at the same time. In consequence, some sovereign borrowers and some commercial debtors are in hardship. There is of course a danger of default in some cases, but I think we can all take comfort from the fact that none of the debtors will want to default because it will not be in their interests to do so.
Various remedies have been suggested. One that I have seen is that there should be, so to speak, an international consortium of central banks and Governments which would assess the total resources and ration credit. I do not think that that is practicable. In this context we can remember, however, that the IMF is there and that it does stand in to support in appropriate cases. The central banks, supported by their Governments as necessary, will take quick and decisive action when the need arises. In the summer of this year a credit of 510 million dollars was made available for Hungary; in August a credit of 1.85 billion dollars was made available for Mexico. I have not any doubt that similar negotiations are taking place even now.
Another solution I have seen is that central banks should support their private banks within their own territories in the event of default by sovereign borrowers. I believe this to be a most dangerous policy. It would merely discourage and not encourage responsible banking. A third suggestion has been that there should be a move towards greater protectionism. Of course, protectionism can help in individual cases for short periods and in the short term, but in the long term it is a disastrous policy and, by common consensus, is self-defeating.
I believe the remedies, the solutions, are much more commonplace and practical. Lenders must suffer the penalties which every lender suffers if he incurs bad and doubtful debts. Provisions must be set up, and in so far as they make inroads into profits, dividends must be cut. The revenue authorities must realise that these provisions are necessary. I do not share the anxiety of the noble Viscount, Lord Chandos, because the revenue authorities in this country at least have always been realistic when the facts are put before them.
In the present recession there has often been a noticeable lack of information about the position and prospects of sovereign debtors and commercial debtors. The information that must have been available when the loans were made must have been even less satisfactory. The conclusion to be drawn from that is inescapable, and needs no emphasis. It is enshrined in the old tag: easy come, easy go. For their part the borrowers also have to suffer the same miseries that occur to everybody who borrows beyond his means. Profligate and extravagant schemes will have to be replaced by stringent economic and financial policies. The banking supervision that has taken place in recent years has greatly improved, but in some places it is still lax, and that laxity has been exacerbated in some territories because consolidated accounts of international banking companies have not been available. This is inexcusable.
But, when all is said and done, there remains the burning question: should lending continue to those sovereign borrowers whose credit is now in question?

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I believe that it is inevitable that it must, and that it should, aided of course by an enlarged IMF. There are, too, cases where it would be appropriate for the central banks and the commercial banks also to lend to sovereign borrowers in this state, but they should do so under the umbrella of an IMF programme. I suggest that all these borrowings should be undertaken only with varying degrees of stringency, on the understanding that the countries will follow sound economic and financial policies in the future.
Two factors would make a considerable difference to the restoration of confidence and breed recovery. We know them all of course, but the two factors are lower interest rates, and stable exchange rates. In the short term Governments can influence both by artificial means, but in the longer term water must find its own level, and interest rates can be kept down and exchange rates can be kept stable only provided that the countries follow sound economic and financial policies. It must surely be there that the hope for the future lies.
Lord Lever of Manchester: My Lords, before the noble Lord concludes. I should like to ask whether we are to infer that the erratic movements of sterling in the past two years are a measure of the unsatisfactory character of the Government at present in office? For my own part I would repudiate that argument, but it seems to follow logically from what the noble Lord said a moment ago.
Lord Benson: No, my Lords. The erratic movements have arisen from the bad economic and financial policies which have been followed by a great many Governments all over the world, and from a failure to understand the deep international problems that face us.
9.24 p.m.
Lord Camoys: My Lords, I, too, should like to thank the noble Lord, Lord Lever of Manchester, for bringing to your Lordships' House the opportunity to debate the very important question of how the Government should help solve the current very serious deficit financing problems. Before setting out my own personal views, I should declare a personal interest in the subject as a director of an international bank. Therefore, I suppose that I should have to admit that I am one of those stupid chaps to whom the noble Lord referred earlier, but I shall try to prove otherwise. The opinions that I set out will be my own.
Although the noble Lord's Question is tightly drawn, I shall, with your Lordships' leave, review the causes of the problem, not least because the noble Lord, Lord Lever, in his articles, inter alia, in the New York Times, and in his recent Churchill Lecture (which was previously referred to), has given his own detailed and interesting analysis of the problem that the international system now. without doubt, faces. While I agree very much with the noble Lord's analysis of this sensitive problem, I do not agree with the cataclysmic approach. While I totally agree with the need for much greater involvement by the International Monetary Fund and its government proprietors, I do not agree—and I share this view with
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others—that totally new mechanisms should be created. Nor do I share the noble Lord's apparent unawareness (if I may say so) of the banking systems' resilience in coping with the urgent problems to date.
As I will explain, I believe that the noble Lord's opinion of rescheduling has been disproved many times and is being disproved, and his opinion of the health of the world's great commercial banks is, if I may say so, a dangerous and unnecessary oversimplification. I would agree with the noble Lord about the failure of the governments of industrialised nations to get involved in a proper solution of deficit financing and about the need to do so now, both directly and indirectly. However, if one were that proverbial visitor from Mars, I sincerely believe that one would be surprised, if one knew the facts, that the international financial problems that we now face are not even worse than they are.
In order to place this sensitive subject in perspective, we have to look at the causes. First, we have the mammoth rises in the price of oil, not only in 1973 and 1974 but also in 1979—all of which had such an inflationary as well as deflating effect on world purchasing power. We had the related rise and then the collapse of non-fuel commodity prices, followed, almost inevitably (although we did not all foresee it) by the collapse of oil prices. So, in turn, energy-deficient economies and energy-surplus economies have been sharply affected. Simultaneously, we had the huge shift in monetary resources from oil-deficit countries to oil-surplus countries', and sadly—and this is very important—the latter were prepared to invest their reserves only on a very short-term basis.
In the absence of any concerted action by its principal proprietors, the IMF failed to solve the huge and, as is now very clear, long-term financing requirements that then occurred. The IMF resources remained too small and its lending conditions too rigid to render it politically acceptable to those nations in need. Part of the problem—and I know this from direct personal experience in the late 1960s and 1970s—was that the IMF in those years heartily disliked both talking to and co-operating with commercial bankers. In fact, they refused to do that. So there was no chance, at what might be called the beginning of this problem, of harnessing together the IMF's undoubted knowledge but limited resources with the much greater, as one might call them, unconditional resources of the commercial banking system. That must be a matter of very serious regret.
In the absence of any positive action by governments and their role as the proprietors of the IMF. commercial bankers stepped into the breach, flooded as they were with Euro-dollars, and often suffering (if that is the right word) from domestic credit controls and under-utilised balance sheets. At the time, they were praised for doing so and, no doubt, governments and the IMF were greatly relieved; for, if the commercial banks had not recycled petrodollars, there and then we should have had an immediate international financial collapse, with all the inevitable economic, financial and political repercussions. In stepping into the breach, the commercial banking system was. as it turns out. was able to transform the very short-term liabilities incurred from the oil-surplus nations into sufficiently long-term loans. Further, the loans that

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were made were seen as a bridge until the time when the world economy recovered. That recovery has not occurred. The commercial banks' ability to lengthen their loans has not increased, and Government-owned institutions have not yet filled that gap.
One of the important areas in which I differ from the noble Lord, Lord Lever, is the state of what he terms "the great banks in the western world". In his recent Churchill Lecture to the English-Speaking Union the noble Lord said:
"If these assets (that is. loans to deficit countries) were realistically appraised for their strict commercial value, there is hardly a great bank in the western world whose balance sheets would not cause the profoundest anxiety".
I suppose that there are some about which that may apparently be true, but I think I have some reason to believe that the noble Lord's statement is not totally accurate, thank goodness!—and I have to say that I think that statement was unnecessarily dangerous. At the very least, he seems to ignore general provisions, some of which are a matter of public record and some of which, sadly, are not.
Lord Lever of Manchester: My Lords, let me say at once that the soundest banks in the world are the British banks under the leadership of the Governor of the Bank of England. What I was saying concerned the world banking system. I wonder whether the noble Lord has studied the facts of the leading American banks and the relationship of Mexican, Brazilian and Argentine loans to their total capital. If even a 20 per cent. discount were taken, it would cause, shall we say, profound embarrassment. As he accuses me of overstating, perhaps he will comment on that.
Lord Camoys: My Lords, of course one has studied the position of the American banks, and one has also studied the position of many other banks. There are some American banks which are more extended in this matter than others. I should like to come on to the question of how a bank defends itself, which is through its profits. I am glad that the noble Lord is more happy about the British banks. I shall come on to the point now.
As any serious student of banking knows, a commercial bank's first line of defence against doubtful debts is the bank's profits, since to the extent that provisions can be taken in the profit and loss account the balance sheet remains unimpaired. On that matter, I have two suggestions. First, the banking industry simply has to improve its lending margins to its larger borrowers. Obviously, mistakes have been made there. Therefore, it will improve its first line of defence. Secondly, Governments, and perhaps this one in particular, have to develop a much more educated view of apparent banking profits and leave them where they are, subject to tax—that is, in the banks. The tax on banks could hardly have been at a worst time. It was quite extraordinary.
The second area in which I differ from the noble Lord, Lord Lever, in his well-publicised written and oral work is on his approach to rescheduling. This is an even more important point. In his Churchill Lecture on 6th December last year he described this as amounting to:
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"Little more than exchanging an incredible and defaulted promise to pay. for another incredible promise to pay at a later date".
Since 1956, some 80 rescheduling or refinances by countries have taken place, often with countries such as Indonesia, Pakistan, India or even Gabon, which are now regarded as healthy. Commercial banks have always been prepared to assist in a variety of ways. Their corporate customers and sovereign customers are now being given similar treatment. One well-known example of successful rescheduling or refinancing, whatever one calls it, in the private sector, was the combined Bank of England and clearing bank co-operation to solve the secondary banking crisis in the 1970s. Initially, the risks of that operation appeared huge, as of course do these other problems today. By dint of calm and firm action, the losses incurred were in fact relatively modest if one looks back to what was feared at that time. Rescheduling or refinancing has always been a regular feature of banking, and, after all, successive Governments of this country are forever refinancing. Sovereign borrowers are not very different, in my humble opinion, from private sector borrowers. All of them are anxious not to default on their debts, since the last thing they wish to do is to cut themselves off from the world centre of finances, whether they be official or commercial.
I am not only unhappy about the attitude of the noble Lord, Lord Lever, to so-called rescheduling but I am also—and I think I share this with many others—equally unhappy about his lack of awareness, as it seems, of the extent of recent co-operation among the commercial banks themselves and the Government-owned institutions. In the not-too-recent past, that concern might well have been fully justified, but recent events are still rather encouraging. First, following what might be called the Polish watershed, the difficulties of getting together over 500 banks have been analysed and discussed at very senior levels among what the noble Lord refers to as the world's great banks. Secondly, national guidance steering committees of such banks have been formed, and they are designed not only to deal with problems as they arise but also to suggest ways of identifying problems before they occur.
Additionally and equally important, in this calendar year there is gratifying evidence that both governments and monetary authorities have at last demonstrated a far greater capacity to intervene, to give a lead and, equally important, to harness their power and that of an enlarged and more enlightened IMF together with that of the commercial banks in dealing with the problems we face. Mexico, Hungary and, hopefully, Brazil are very good examples.
This harnessing of the different capabilities may be being achieved only at the eleventh hour. That achievement might better have been achieved earlier but, seeing where we have reached, I would be loath to support the noble Lord's suggestion in the New York Times of 24th September that:
"Governments should now set up a committee to decide in broad terms the overall amount of future lending necessary in the general economic and political interest…It must then decide where the money is to go and outline conditions that will reduce the waste and misdirection of the past in the interest of both the borrowers and the lenders".
Lord Lever of Manchester: My Lords, there is the export credit guarantee system in every civilised country in the world.
Lord Camoys: My Lords, well intentioned as I believe that suggestion is, I can only speak personally. There is hardly anything that would frighten one more, as a banker, than the prospect of trying to obtain timely decisions from such a body. Rather I believe that the Government should be encouraged to use the existing institutions already established. The IMF has, as last, been dragged to the centre of the stage, and at the Summit Conference held at Versailles in June, it was allotted the task of helping the major powers coordinate their policies to the best advantage of the world economy. In my humble opinion, Governments should follow that resolve through urgently and with more resources. That is where I agree with the noble Lord so much.
I therefore look forward to the responses of my noble friend the Minister, hoping that he will explain the Government's position on increasing both the IMF's quotas and the general arrangements to borrow. I also hope that he will give the Government's view on the Group of 30 proposal that the IMF should be empowered to borrow immediately in the commercial markets.
Lord Harmar-Nicholls: My Lords, before my noble friend sits down, did I understand him to say that, as
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a banker, he saw no fundamental difference between a sovereign borrower, who cannot go bankrupt in the accepted meaning of the word, and others who can and have to do so?
Lord Camoys: My Lords, I am not sure that I am sufficiently experienced to give a totally educated view on that point. I think that a sovereign borrower could go bankrupt and this is the great fear in the present situation. The present situation is one that requires very careful handling, if only to encourage sovereign borrowers who are already in difficulties not to default. Anybody can, in a sense, go bankrupt. People might be very unwise to take that course. They have to be encouraged by further help not to do so.
Lord Bruce of Donington: My Lords, would the noble Lord agree, in discussing the position of default by a sovereign state or by an ordinary bankrupt, that, so far as a creditor is concerned, a bankrupt position is a little more favourable, because there is a chance of getting a dividend? If a sovereign state defaults, there is no way in which a creditor can get anything at all, so is not the sovereign default worse?
Lord Camoys: Yes, my Lords. I have to agree with that. In fact, one of the problems of commercial banks who have been lending is that they have been unable effectively to impose conditions, which the IMF might have done. That makes the whole situation more serious.
9.42 p.m.
Lord Taylor of Gryfe: My Lords, like other noble Lords who have spoken in this debate. I should like to congratulate and thank the noble Lord, Lord Lever, for introducing this subject, albeit in the inappropriate form of an Unstarred Question. I hope that at some time, in the business arrangements of the House, we might be able at an earlier hour to spend a little more time on the very fundamental issues which have been raised by the noble Lord. I should like to say, too, that not only the House, but the country is indebted to the noble Lord, Lord Lever, for consistently drawing our attention, in speeches, in articles and in private conversations, to the growing seriousness of the issues which he raises.
Tonight, since we all have our eye on the clock, I should like to deal with one aspect of the problem, and it is an issue on which the noble Lord, Lord Hatch, dwelt at some length. It is the problem of the LDCs, and I believe that dealing with them requires not only the sharp analysis of the banker, but also a recognition of a moral dimension. At the heart of the crisis in relation to the LDCs, is their lack of liquidity and their inability to service the loans from the banking institutions of the industrialised countries.
This arises from several causes. First, the decline in world trade has brought about a dramatic reduction in the price of primary products and raw materials. In the last year the price of primary products has fallen by 14 per cent. and this is the currency by which they will have to service the borrowings that they have incurred. In order to modernise and create a viable economy, these countries have been forced to borrow at very high interest rates. In the last two or three years, the interest rates at which they have borrowed have frequently been related to the London inter-bank rate—the LIBOR rate—and the debt service ratios were 15 per cent. in 1977 while last year they were nearer 30 per cent. So here you have a critical squeeze on the LDCs. First, the resources by which they service a debt have diminished in price and in value; and, secondly, the interest rates at which they are now borrowing have risen against them. This has also been accentuated by the lack of responsiveness of the major aid-providing countries.
While the United Nations proposes 0.7 per cent. of GNP as a reasonable objective for countries giving aid to developing countries, the figure for the OECD and OPEC countries is now less than half that target. This has some implications for the LDCs and the financial problem. The scope of the debt problem of the LDCs estimated now at about £500 billion to £600 billion, is of such a character that the existing international agencies are unable to cope. The IMF, the World Bank and the IDA are inadequately funded, the commercial banks have become increasingly nervous and their auditors are beginning to question the quality of some of the loans which appear in their balance sheets.
Another pressure which forced the commercial banks initially into perhaps excessive lending was the accumulated availability of dollars from the OPEC countries which were placed on deposit in commercial banks. This compelled them in turn to make these dollars work by lending. There was a period of fairly aggressive lending, but that is now at an end. The
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nervousness on the part of the commercial banks has resulted in a growing amount of short-term lending. When one considers the structural problems of the LDCs, short-term lending is irrelevant to the reconstruction of their economies. The proportion of short-term debt is now approaching 20 per cent. This provides no basis for the economic restructuring which is necessary to bring these countries to economic well-being.
The nervousness of the commercial banks and their withdrawal from the scene throws the responsibility back on to the international institutions. But the World Bank, the IMF and so on are not equipped, either financially or structurally, to deal with this kind of situation. The IMF operates on a strict country quota basis, more or less, which means that Mexico, for example, with its massive debt can receive from that source only a somewhat limited amount of money. What they are able to spread on a country quota basis bears no relation to the current size of the debts of many of these countries.
The BIS, to which the noble Lord, Lord O'Brien of Lothbury, referred and of which I believe he is a member (or, as he calls it, a bystander in their activities) has helped with a bridging loan in the case of Mexico and in other situations. However, the BIS. by its very character, cannot make medium-term finance available, since its resources are made up of short-term deposits from the central banks. There is no possibility, therefore, of the BIS fulfilling the role we want it to fulfil, although it is making a useful contribution to relieving immediate pressures. The IDA has completely inadequate resources. The World Bank, if it is to fulfil a useful or relevant role in this situation, will require to expand its capital base.
I agree with many noble Lords who have said this evening that we do not require any new financial institutions. This is the only matter upon which I disagree with the noble Lord, Lord Lever of Manchester. I do not think that we require new financial institutions. I believe that we require new-attitudes and new moods in relation to the nature of the problem. I believe it is right that the IMF should lay down certain conditions for its lending. I am not opposed entirely to the conditionally concept of IMF lending. However, I think that it should be less rigid and that the strict application of the policies of sorting out the balance of payments by cutting back Government spending within a country can lead to all kinds of social tensions within that country and defeat its initial purpose. There have been cases of lending which have resulted in some rather foolish projects. I am familiar with an island which has a population of 1 million and with no steel consumption in sight, but which has just completed the building of a modern steel plant. It is that kind of irrational use of resourses which must be taken into account by any of the international lending institutions.
I should certainly support the creation of some special emergency facility which could make these institutions much more responsive to the demands which have to be met. I support the view that there should be more flexibility in the application of IMF lending policies and would also like to look at the whole question of the additional facilities which might be created being used to some extent to support

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medium-term commercial lending on an insurance basis. I know that the noble Lord, Lord Benson, does not support the idea of the Government underwriting in any way commercial lending—but the nature of the problem is such that we must get this cycle going again. We must get trade moving again. We must get the LDCs in a position of financing reasonable projects which can have long-term impact on their economic viability. We will not do this if we are too strict or if the commercial banks contract out of medium-term lending.
I certainly support the ideas which are now being discussed and which originated at Ditchley for an international exchange of information, so that countries which are large lenders in various parts of the world will have at their disposal a fair picture of the economic situation and of the viability of individual borrowers. I wonder too whether the Western world should not look occasionally at the activities of arms salesmen, who go around the LDCs creating nervousness and tension in order to sell their products. To me that is a rather wasteful use of resources. I looked at the statistics for Uganda the other day and found that Uganda is spending 60 per cent. of her GNP on armaments and only 11 per cent. of her GNP on agriculture. It occurs to me that that is an imbalance and that we ought to restrict this form of salesmanship, which eats up useful resources in the LDCs.
I wonder whether in our search for some control of currency fluctuations, the Government may care to comment on the EMS and its operations, and the Government's attitude to the EMS in making at least some contribution to keeping currencies within manageble bands. I wonder if the Government will tell us tonight how they view the question of increasing substantially the quotas to the IMF and the other international institutions. Reference has been made to the Export Credits Guarantee Department by the noble Lords, Lord Hatch of Lusby and Lord Camoys. In my dealings with the ECGD I have been full of admiration for the sensible way in which they apply their resources as an insurance organisation supporting the export of British goods and encouraging world trade. I do not regard the ECGD as being in any way as an international lending institution.
Can I say this finally: that I have read over the last two or three years the warnings of Lord Lever. I know that since he is not engaged daily in banking he can be less inhibited about warnings of the dangers in the crisis situation. I know that most bankers who are involved in the day-to-day practice of banking have to be careful not to create too much nervousness or too much uncertainty. But I do believe there is a great deal in what Lord Lever says, and that we have reached a stage when we cannot depend, as Lord Benson seemed to predict, on the cyclical recovery of the economy. And I cannot accept fully the assurance of my noble friend and good friend Lord O'Brien that we are managing all right and that it is going to come all right.
I believe there is a real crisis and I believe that this real crisis depends on some international action not dissimilar to Marshall Aid, when we faced the problems of post-war Europe and had to support
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countries that were defeated in the war and had very limited resources. It is that kind of massive international effort that has to be applied to the present situation if we are going to survive. You know, my Lords, we spend millions, as was announced yesterday, to create a defence system against the Soviets, because we believe that our Western society, with all the values which we treasure, is endangered from that source. But that is not the only source from which they are in danger. Unless we can sort out the problems of the Western world, unless we can cope with these kinds of problems and uncertainties, unless we can arrest the decline in world trade, these values, and our system and our society will be equally threatened. So I commend to the Government to take immediate and drastic action to face the very critical situation which the noble Lord, Lord Lever, has drawn to our attention.
9.58 p.m.
Lord Bruce of Donington: My Lord, I should like to add my thanks to those of your Lordships to my noble friend Lord Lever for having given us the opportunity to debate this very important subject. It is, of course, possible to overestimate its importance, and perhaps there is a danger, too, of underestimating it, but, listening to your Lordships tonight, particularly those of your Lordships who have banking experience and City experience, I am persuaded that the international banking system is in very grave crisis indeed. I am fortified in that belief by an analysis that appeared in the Economist for this week, though it analyses only the Latin American position. However, the financial press since the weekend has highlighted other countries in addition to the ones I am going to cite.
One of the most disturbing features about the present position of the borrowers is the very large percentage of the total loans outstanding that consists wholly of interest. In the case of the Argentine, it is about 20 per cent. of the total external debt which comprises interest: in Mexico it is 44 per cent., in Brazil 60 per cent., in Chile 53 per cent., in Venezuela a mere 18 per cent., in Colombia 35 per cent. and in Peru some 28 per cent. These are enormous sums of interest on top of principal. If one looks at the same time at the total export income of many of these countries to which I have referred, it will be found that the interest outstanding on their loans is in excess of their annual income from exports.
No wonder, therefore, that the bankers of the world are worried. No wonder there is so much soul-searching. The position is very grave indeed. There is a fear that if there is an international banking collapse—by that. I mean default, not bankruptcy, by a sovereign state against whom there is no physical sanction to put the bailiffs in and take away the assets—the world banking system will be in a very serious condition indeed.
I was a little surprised by the whole tone of the debate, because of course it is fundamentally a debate on economics, a part of the integral whole, albeit a very specialised part. One thing that did occur to me is that for once the ordinary people of the world are not being blamed for it. Nor are the ordinary people in Britain being blamed. Those of us on this side of the House are well accustomed to lectures from the other

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side of the House on the need for British industry to become competitive and on the country's high and uncompetitive labour unit costs. We are accustomed to the reproaches to the ordinary working people in this country that daily pour from the press that supports the noble Lord opposite. These do not always come from the noble Lord himself, who is a gentle character, but possibly in more strident terms from his right honourable friend the Secretary of State for Employment in another place.
For once, it would appear that the ordinary people of the world are not at fault. This is indeed remarkable. Instead something has gone wrong with the wonderful folk. Something has gone wrong with those who have universal acclaim as being the leaders of world economics, leaders of world finance. Indeed, it is said that, in effect, the banks are being too competitive. This is getting a little odd. We are told that in commerce and in industry we must be competitive. Yet here we have observations from noble Lords opposite about the need for discipline, about the need for international action and about the undesirability of competitive devaluation. If it is competitive, what is wrong with it? If competition is all right for everybody else, what has suddenly happened now there is competition in the banking industry?
We all know what has happened. The noble Lord's Government started it. In the autumn of 1979 they shoved interest rates up by 4 per cent. As the noble Lord, Lord O'Brien of Lothbury, adequately pointed out, what then immediately happened was that funds came flowing in to London for which a high rate of interest had to be paid and then, as he also quite correctly pointed out, that money has to be re-lent, and re-lent at a profit. So, despite the King Canute posture of the noble Lord, Lord Cockfield, the money supply went up and they did not even know how to stop it going up. So there was competitive lending.
Lord Camoys: My Lords, I think the general tone of what has been said before is that the problem is that the international monetary institutions have not become involved. It is not a question of competition among the commercial banks, it is a question of the lack of the right type of finance becoming available.
Lord Bruce of Donington: My Lords, I do not want to press the noble Lord too far, but when The Times talks in these terms it behoves us to take notice. We all pay attention to "The Thunderer" from time to time, and it has no doubt about it. The issue for 14th December says:
"A default can only occur if a country had overborrowed. It can only have overborrowed because its sums were wrong, either in the estimate of its own likely performance, or of its capacity to adjust to overestimates of the world's general economic performance. Whichever way you look at it the borrowing countries have made mistakes, which should not, on the face of it, be used to hold the industrialised world to ransom. So surely did the lenders. If it is a banker's business to lend money to clients, it must be bad business to lend so much to any particular client that the borrower acquires a stranglehold over the bank because the bank can no more afford to stop lending than the borrower cn afford to stop borrowing".
That is precisely what has been happening. There has been a rush to lend all over the world and, more particularly, not merely to lend for useful purposes but to lend for the sake of lending—to lend because of the compulsions to lend.
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Look at the process. Very large numbers of countries in the world have been pursued—and I do not joke about this—by arms dealers, arms manufacturers and Governments pressing arms upon them which they could not possibly afford and which they did not need. Close on their heels have come the bankers offering to provide funds in order to buy these particular items. And so there comes the position described so graphically in the Economist—the scramble to lend, to lend almost at any price; competitive lending. Competition has gone on and has produced precisely the situation that we have today.
Lord Harmar-Nicholls: My Lords, I am looking at the clock but I just wondered why the noble Lord was so frightened of telling what he called the "ordinary people" that they have a contribution to make. Was it not their appetite that helped the borrowing which brought about these terrific interest payments which he says are the basis of all the problems?
Lord Bruce of Donington: My Lords, I am most grateful for the noble Lord's intervention. I do not really believe that the population of San Salvador, for example, wanted its Government to have large loans in order to buy arms in order to oppress them, and for murders to take place in the streets. This is not merely a caricature; it is exactly what happened.
The noble Lord, Lord Soames, in pursuing his desire for competition, made an extraordinary observation and I looked at the noble Lord, Lord Cockfield, while he was making that observation to see whether there was a little more in it than appeared on its face. He said that we had been taken in by our own rhetoric. Immediately following that observation he said that we had learned that reducing inflation and interest rates is not enough to encourage recovery. If that be so, then the noble Lord, Lord Cockfield, has some penance to do.
Lord Soames: My Lords, will the noble Lord give way? I am sure that I have known him long enough to know that he would not wilfully put the wrong interpretation on my words. What I said was that it was very right and very necessary to get interest rates down and to get inflation down, but that it was not enough because there also has to be a deal of action in the international sphere—because we are so interdependent one with another—if we are to get the world out of recession. That is all I said. It does not in any way cast aspersions upon the policies of Her Majesty's Government.
Lord Bruce of Donington: My Lords, I accept the position of the noble Lord within the context that he has now set, but it of course makes nonsense of the initial rise in interest rates by the Government of up to 4 per cent.—one of the most disastrous steps which has ever been taken since this Government came to office, the repercussions of which we are still, in fact, feeling. but in due course, perhaps, he may denounce that.
We have got ourselves into a position by following free enterprise banking—as, indeed, my noble friend Lord Lever reminded us—whereby the whole thing is as near as may be a complete shambles. The noble Lord, Lord Benson, gave as one solution to the situation, as a guideline, that the accounts of banks should show an accurate position. He, as a very

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eminent accountant, would know and would tell us what that means. It means a true and fair view.
If there are banks in the world and in this country that have large sums outstanding to countries likely to default, and if they adopted the prudence concept, as laid down in standard accounting practice, their balance sheets at the present time would be in a very sorry state indeed.
Lord Camoys: My Lords, with great respect, I think that ignores the very considerable general provisions which have been built up over many years to deal with just this fairly (thank God!) unusual situation. For the noble Lord to make that statement without taking that into account is, I think, rather irresponsible.
Lord Bruce of Donington: No, my Lords, not a bit. The noble Lord will be well aware of the observations of the noble Lord, Lord Benson, on inner reserves and matters of that kind. He will know perfectly well that under the revised code, in order to comply with EEC regulations which are now enshrined in the Companies Acts, we have to show a true and fair view.
Lord Camoys: But, my Lords, the principal banks involved in this in this country are the clearing banks, and they declare their general provisions totally without any secrecy whatever. So I am not sure what the noble Lord is saying.
Lord Bruce of Donington: My Lords, I am not endeavouring to cast any aspersions on British banks. I entirely share the views of my noble friend Lord Lever on this subject. But I am aware of a new vogue in the United States, of which the noble Lord himself must be aware, called "creative accounting", whereby computed losses, which ought on a prudence concept to be written off in one year, are permitted now, by creative accounting, to be written off over a period of 10 or 20 years. Perhaps the noble Lord will familiarise himself with that.
To return to the international banking situation, of course there must be an international co-ordinated effort by all concerned, including Governments, to get over this particular state in which the world now finds itself. I, too, am a little puzzled sometimes by what is meant by "rescheduling". It is a term that is used in the financial press quite considerably. It can, of course, mean an extension of time over a longer period, reducing the instalments; it can possibly involve reductions of interest. But I do not like to contemplate the addition of further sums with more interest at the same rates as part of the rescheduling process, because I think that the world will be far worse off for it; there will be no improvement whatever.
In particular, I think that our Government have to give a lead in this matter. We are one of the four financial centres of the world. The main four are ourselves, New York, Frankfurt and Tokyo. I believe that the Government have to take a lead in this. The Government have to take an imaginative look over the international scene as a whole. Just as their original policies were very largely responsible for precipitating the rise in interest rates, which itself precipitated a good part of the depression in which we now are—and
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the Government were themselves responsible for activating a good deal of the world depression on which they now rely—so they should now take a leading part in helping the world to extricate itself.
This cannot be done by these ridiculous and idiotic monetary policies which have been proved so wrong. If the noble Lord reads his own speeches and the forecasts he has made this last three years and is honest with himself, he will know they have failed. He will now know they are wrong. It is no good the noble Lord, or the Government, mouthing the same old slogans. The problem will not be killed by slogans at all. It will be done by the banking resources of the leading countries and their Governments getting together to make a realistic appraisal of what world financial requirements really are in order to be able to release the factors of production so that people who want to work can live while they are working. This is what is required: a balanced look at the whole picture and constructive action on those lines.
As my noble friend Lord Hatch said, it is not merely for the sake of the developing countries but for the sake of our own country, because, unless we take action both nationally and internationally to reverse the disastrous deflationary policies that have been operated over the last three years, there will be no recovery for us, there will be no recovery for Europe, and we shall be doing the world a poor service. I hope that at this late hour and as a result of the debate initiated by my noble friend Lord Lever. Her Majesty's Government will think again. The people are already thinking: it is high time the Government caught up with them.
The Secretary of State for Trade (Lord Cockfield): My Lords, the noble Lord Lever, is a great authority on these matters and we listen to him with great interest and indeed with respect. But it does not follow from that we agree either with his analysis and his conclusions or with the remedies that he proposes. Still less do we agree with his noble friend Lord Bruce of Donington, who said, "the international banking system is in a state of very grave crisis". He then went on to say that the situation was, "as near as maybe a complete shambles". I realise that statements of that kind make good theatre, and the noble Lord, Lord Lever, at one time got involved in his speech with King Lear. I realise they make good theatre, but they do no good service.
Lord Lever of Manchester: My Lords, I made no reference to that distinguished person. I think it was a noble friend.
Lord Cockfield: My Lords, I apologise to the noble Lord for attributing the reference to King Lear to him and not to his noble friend Lord Ardwick.
Lord Ardwick: My Lords, I was merely referring to the noise upstairs—the noise of the thunder outside.
Lord Cockfield: My Lords, whether the noble Lord was referring to the noise upstairs or the noise on the Bench immediately in front of him, I do not know. All I would say is that the comments of the noble Lord, Lord Bruce of Donington, do no good service either to the international banking system or to the international community as a whole.
Let us start by looking as calmly as we can at the actual facts. The total external debt of the third world

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countries now just exceeds 500 billion dollars. In real terms, that is somewhat less than 2½ times what it was 10 years ago. In relation to GNP, the growth is relatively modest but individual countries, particularly in Latin America, have very heavy debts—Mexico, Brazil and the Argentine are prime examples. These are all countries with great economic potential. The problems arise not so much from the magnitude of the debts as from the impact of the recession, which has stunted growth everywhere, and sometimes from economic mismanagement as well. But, having regard to the potential of these countries, and the improvements in management that are feasible, given proper control over the economy, it is quite wrong to suggest—as has been suggested by several noble Lords this evening—that this is massive bank lending which sooner or later will have to be written off.
I do indeed understand the anxieties which have been expressed, but at the same time we need to remind ourselves that the international institutions, and in particular the IMF, have faced serious problems before and found the solutions to them. The picture therefore is one that causes concern, but it is certainly not one which ought to cause alarm. On this crucial point of analysis, I part company with the noble Lord, Lord Lever.
Let us look therefore at the part that the IMF has been able to play. Mexico, one of the major debtors, has now reached agreement with the IMF on a 3½ billion dollar support programme. Brazil and the Argentine have both indicated willingness to agree to IMF adjustment programmes. Other major borrowers are also in discussion with the fund. In all these cases, the fund is playing something of a new role in helping to co-ordinate discussions between the countries concerned and the commercial banks.
It is, of course, clear that in present circumstances the resources at the command of the IMF need to be strengthened to sustain the increasingly important role that the fund is playing. Currently the quota-based resources of the fund total about 65 billion dollars and the supplementary lines of credit—both bilateral and under the General Agreement to Borrow—amount in round figures to a further 25 billion dollars. These are the monies that the fund has available to support its members. Under its articles, the fund must review quotas at intervals not exceeding five years. The present quota review has to be completed by the end of 1983. In the past, it has normally taken up to two years for the quota increase to be implemented. On the present occasion, we should like to see a substantial increase, and early implementation.
In his speech to the IMF's annual meeting in Toronto in September, my right honourable friend the Chancellor of the Exchequer advocated an increase in quotas of at least 50 per cent. Events since then have suggested a need to put an increase in quotas in place as quickly as possible. There have also been proposals from the Americans to institute among the Group of Ten a substantial line of credit which would be available to the fund in times of major strains upon the international financial system.
These measures will help to underpin confidence in the international financial system. But it is equally essential that all countries, and particularly those with
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heavy liabilities, should pursue prudent financial and fiscal policies. It is the pursuit of imprudent policies which has resulted in high inflation, high interest rates and high unemployment. In the developing world, falling commodity prices have led to increased indebtedness and increased difficulties in meeting debt servicing costs. In developed and undeveloped countries alike, the strains have often shown themselves most acutely in the case of countries with a record of mismanagement, who have delayed adjustment too long. Unless countries are prepared to help themselves, there is nothing anyone else can do to bail them out of their difficulties. Indeed, it is a condition of assistance by the IMF—as we know to our own profit—that prudent adjustment policies are followed.
Sometimes, too, there is an important role to be played by the monetary authorities who can take action to calm the markets and, where necessary, to provide direct assistance to borrowing countries to tide them over during the period they are putting programmes of adjustment in place with the help of the IMF. Mexico illustrates this point. Mexico was able to get prompt assistance to the tune of some 1.9 billion dollars from the United States authorities and from the BIS with the support of a number of central banks. Her Majesty's Government gave their backing to the Bank of England's participation in that group of central banks. The fall in inflation and the fall in interest rates have been a significant help. As inflation comes down, so do interests rates, too. The response is not necessarily immediate or automatic but it is undeniable there. My noble friend Lord Soames referred to recent reductions in American interest rates. I doubt whether the American authorities would entirely accept my noble friend's analysis. We welcome the recent moves by the Fed and these moves recognise as we indeed have always done ourselves, that money supply statistics can be distorted by institutional changes in financial markets and that it is sensible to take account of a range of factors in interpreting them. We therefore welcome the recent reduction in United States interest rates.
The noble Lord, Lord Lever, and indeed other noble Lords, commented on the role played by the international banks and those responsible for their supervision and regulation. There would indeed have been room for justifiable criticism if banking supervisors had ignored the potential problems to which so much attention has been paid, both in public discussion and in the debate today. But that is not the case. As long ago as 1974 the central bank governors from the major industrialised countries made it clear that they were satisfied that means were available to provide temporary liquidity to the Euromarkets, and that they would be used if and when necessary. In 1975 the banking supervisors of the major countries agreed to a set of guidelines on prudential supervision which have become known as the Basle concordat. So it is wrong to say that banks' off-shore business is not supervised or regulated from a prudential point of view. It is. Regulation of the international banking market, like the regulation by individual countries of their domestic banking markets, may not be perfect. But the framework of regulation is well established and it is both wrong and unhelpful to suggest that it does not exist at all. The contrary is the truth.

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In today's markets, there are very strong reasons for both lenders and borrowers to avoid outright default; and in recent years all major problem countries have made considerable efforts, usually successful, to keep paying interest on outstanding loans. Rescheduling is something we all try hard to avoid. But if it does happen it is not a disaster. The effect on the lending banks is not to make them insolvent but to reduce their liquidity, and to some extent the quality of their assets. Banks are right to worry about their exposure in some cases and to be reluctant to increase it. Nevertheless, there is both justification and need for lending to continue in cases where countries have adopted appropriate adjustment policies but may still require time and accommodation to carry them out.
Perhaps at this point I may touch upon one or two specific suggestions which have been made in the course of the debate. May I start with what I hope the noble Lord will forgive me if I describe as the Lever Plan for the establishment of a committee of central banks and Governments to determine the level of international bank lending and apportion it to borrowers. This plan was supported by the noble Viscount, Lord Chandos, but opposed by the noble Lord, Lord Benson, and my noble friend Lord Camoys. Whatever view is taken about how the Euromarkets have operated, the idea of substituting allocation by committee for allocation by the markets has few attractions.
Lord Lever of Manchester: My Lords, the noble Lord would not want to put up skittles to knock down. The last thing in the world that I want to do is to have a committee of central bankers telling individual banks where to lend. The proposal is rather on the lines adopted by every export credit guarantee system, that this would be internationally arranged for limits of credit borrowing to particular areas so that we at least know broadly where the money is going and whether we want it to go there.
Lord Cockfield: My Lords, I do of course entirely accept what the noble Lord says. But I entirely disagree with him on his interpretation of the role of the Export Credits Guarantee Department. There is a fundamental difference between the insurance of credit and the granting of credit itself. I do not think for a moment the kind of position that the noble Lord has put forward, either in the form in which I had deduced it from various writings which appeared in various places or in the form in which he now explains it more fully, would be effective.
May I come now also to the proposals made by Secretary Regan which were quoted by the noble Lord, Lord Lever, and by my noble friend Lord Soames. The noble Lord, Lord Ardwick, also referred to Secretary Regan's statement. What Secretary Regan proposed was this: first of all, a new mechanism for co-cordinating rescue operations to countries in difficulty; and, secondly, a new Bretton Woods conference. Secretary Regan has stressed that these were personal ideas and he has since said that anything like a new Bretton Woods conference is a long way off. The developed countries are already co-operating closely in helping problem countries such as Mexico, Brazil and
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Yugoslavia through the IMF, through the Group of Ten and other groupings of finance Ministers, through the central bank governors in Basle and through the Bank of International Settlement.
Several noble Lords, particularly my noble friend Lord Soames, mentioned their wish that we should have more stable exchange rates. I think that all the world's major countries would like to see a return to more stable exchange rates and indeed greater stability elsewhere as well in interest rates and in return also to stable growth. The free world's leaders said as much at this year's Versailles Summit. At the same time, they recognised that the way to such stability lies through lower inflation and greater convergence, particularly among the major economies. They also recognise the key role the IMF has to play in promoting such convergence. That is the only way to the stability we should all like to see.
A number of noble Lords, among them the noble Lords, Lord Ardwick and Lord Hatch of Lusby, pleaded the case of the third world countries.
Lord Soames: My Lords, before my noble friend leaves this matter, would he allow me to intervene? Am I wrong in interpreting the statements made in the United States before the meeting of the Group of Five, referring to the possibility of a conference of the type of Bretton Woods, as inferring that what Secretary Regan was hoping for was to give some form of lead to the developed world and to the Group of Ten, with the objective of building some greater stability into the international money markets?
Lord Cockfield: My Lords, there has of course been a great deal of discussion and speculation on these matters, and Secretary Regan was contributing to this discussion. But he has made it clear that he regards the emergence of anything like a new Bretton Woods as a development that lies quite a long way off. This does not in any way diminish the value of discussing these projects, but anybody who thinks this is going to provide the answer in the near future is unlikely to have his hopes realised. These are much longer term developments.
Perhaps I might at this stage return to the point I was going to make about developing countries. There is, of course, an important and continuing role for official aid to many developing countries, but no service is done to developing countries by continuing to lend, regardless, to those who have mismanaged their economies, who are reluctant to help themselves or who have delayed adjustment to their external circumstances for too long. The noble Lord, Lord Hatch, himself admitted the gravamen of many of these charges. The approach adopted by the IMF is the right one. Countries that reach agreement on sensible adjustment programmes with the IMF have usually found further commercial lending from the banks forthcoming.
Suggestions were made—the noble Lord, Lord Benson, referred to them, not with approval but with disapproval, and it is a disapproval which I share—for the refinancing or guaranteeing of existing bank loans to developing countries by Governments or by a body such as the IMF. The difficulty with proposals of this sort is that they delay adjustment on the part of the

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economies concerned, they give an incentive to lending on uncommercial terms and they mean that if, for example, the Government charged a fee or a premium for the lending then it is unlikely that the commercial banks would be greatly attracted by the proposition.
The noble Lord, Lord Chandos, raised the question of the Inland Revenue's approach to rescheduled sovereign loans and the tax treatment of provisions banks make against them. The point to which the noble Lord drew attention has been, and is being, considered by the relevant authorities. I am afraid that at this stage I can go no further than that.
Lord Harmar-Nicholls: My Lords, before my noble friend leaves that point, may I say that I have sat through the whole of the debate, I have enjoyed it and I have learned a lot from it. I have listened particularly because I wanted to hear what my Government intended to do. We have had the explanation of what the Americans think is meant by getting back to the concept of Bretton Woods. They think it is a long way away. What is our Government's attitude going to be towards bringing it a little nearer, if possible, and what influence do we have to try and shorten the distance? That is really what I wanted to hear.
Lord Cockfield; My Lords, had my noble friend possessed himself in patience, he would have had the answer very shortly. The world financial system is passing through a difficult period. About this there is no doubt. Many schemes of various kinds have been suggested, both in your Lordships' House and outside, to deal with these problems. I have commented on a number of these schemes. But, in general, I think we would do best to beware of schemes that involve tackling today's problems with institutional reforms that would, inevitably, take many years to implement, and beware also of proposals that substitute Government decisions for those better made in the market place.
The message that I would leave with your Lordships is the need to fortify and improve the existing mechanisms. In this, I include Governments of both developed and developing countries, the central banks, commercial banks and their supervisors and, in particular, the IMF, which has a key role to play now, as it has had in the past. These mechanisms have withstood great strains and stresses over a long period of time, and have coped with novel and unexpected developments with remarkable success. We need to build upon that success, and I see no reason why these well-tried institutions should not continue to cope with the situation successfully.
Lord Taylor of Gryfe: My Lords, before the noble Lord sits down, there were specific suggestions made and specific answers called for, such as by the noble Lord, Lord Harmar-Nicholls, who has just raised a question. Are the Government now committed fully to a substantial increase in the IMF quotas, are the Government committed to a much more generous aid programme and are the Government committed to the kind of conference which Mr. Regan of the United States has suggested, to discuss the basis of a new Bretton Woods? If the Government answered on these points, it might be helpful to us.
Lord Cockfield: My Lords, I have, in fact, answered every one of those points, and I suggest that the noble Lord reads what I said with care tomorrow.
Lord Taylor of Gryfe: My Lords, with due respect, the noble Lord said—and I listened very attentively——
The Earl of Swinton: My Lords, I think we are getting into great troubles if we start raising questions on an Unstarred Question when the Minister has sat down.
Several noble Lords: Why not?
The Earl of Swinton: Because, my Lords, I think it is against the best traditions of this House. I stand to be corrected if I am wrong, but I am sure that I am right. On an Unstarred Question, when the Minister sits down, that is the end of the debate.
House adjourned at seventeen minutes before eleven o'clock.